Spreadex Market Update
Bank of England relaxes bank lending rules, while pound hits fresh lows
The central bank pointed to a rather worrying list of woes this morning, including the size of the UK current account deficit and the post-Brexit impact that is just ‘starting to crystallise’. The combat the situation Carney and co. have reversed the counter-cyclical capital buffer increase they implemented earlier in the year, freeing up around £150 billion for banks to pump back into the economy. This news was of little comfort to the pound, which spent the morning grazing fresh 31-year lows against the dollar, though did help the FTSE far outperform its Eurozone peers, the UK index jumping half a percent to 6550.
As mentioned the Eurozone indices looked pretty dire this Tuesday, the DAX and CAC dropping around 1.5% apiece despite a series of improvements in the region’s services PMIs. It seems that the strength of the euro against the pound (the latter falling to a 2 and a half year low against the former) is dragging down the German and French indices, all the while helping to boost the multinationals in the FTSE 100.
Looking ahead to the US open and the Dow Jones appears set to struggle under the weight of the stronger dollar, the futures pointing to a near 90 point drop after the bell. The main figure for the US this afternoon is the latest factory orders reading, expected at -0.8% against last month’s 1.9%.
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