Spreadex Market Update
Pound dealt blow as post-Brexit impact makes itself felt on manufacturing and services sectors
While the manufacturing PMI, at 49.1, was a tad better than expected, that’s still the lowest reading since the end of 2012; as for the services sector, well, that fared even worse, coming in at a lower than forecast, and effective 7 year nadir, of 47.4. Combined the figures suggest that the UK economy is contracting at a quarterly rate of 0.4%, severely undermining the quiet sense of acceptance that has appeared in the month since the referendum results were announced.
The pound seemed to bear the brunt of the bad news this Friday, slipping by 0.7% against both the dollar and euro, thanks to the fact that those PMI readings increase the likelihood of the Bank of England taking action in August. The FTSE, meanwhile, sat fairly flat just above 6700, the index’s glee at a weakened pound tempered by the gloomy outlook painted by the morning’s Markit data. Despite their own solid figures the Eurozone indices were also dragged down by the UK’s post-Brexit PMI mess, the DAX and CAC falling by 0.3% and 0.2% respectively.
Looking ahead to the US open and after being pushed back to 18500 (its first non-record breaking close in around a week) the Dow Jones will be aiming to regain its lost ground later this afternoon. Like its UK and Eurozone peers the main occupation for the index this Friday will be the latest US flash manufacturing PMI, which is expected continue its recovery to 51.9 from 51.3 the month before.
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