Spreadex Market Update
Post-Brexit manufacturing and services PMI shock continues to weight on sterling
The pound dominated discussion this afternoon, plunging by 0.8-0.9% against both the dollar and the euro to fall back to the lower end of the week’s trading band. The FTSE on the other hand crept higher after a meek start to the day, climbing near its recent 11 month highs. The divergence between the pound and the FTSE suggests that the dire set of recession-suggesting manufacturing and services PMIs released by Markit this Friday have only enhanced the argument of those in the Bank of England that are looking for a rate cut or fresh stimulus measures in August. The pro-Remain camp must also feel fairly vindicated this Friday; a month after the referendum the impact of the Brexit is beginning to materialise, a trend that is only likely to continue in the coming weeks.
There was little beyond the morning’s PMI drama to drive the markets this Friday. The gains made by the euro and the dollar dragged down the DAX, CAC and Dow Jones as the afternoon went on, despite the PMI-picture from each country reflecting only minor, and in some cases non-existent, effects of the Brexit.
Next week will likely be swallowed whole by the sheer number of UK and US earnings set to be released. Most notably Apple and BP both report on Tuesday, with Facebook, ITV and GlaxoSmithKline on Wednesday, BT, Sky, Amazon.com and Alphabet on Thursday and Barclays and ExxonMobil on Friday. Then there is the month’s Federal Reserve meeting on Wednesday; after a fortnight of inaction from the Bank of England and the ECB it is hard to imagine Janet Yellen and co. taking a different path, though the tone of the statement should dictate the market sentiment in the back end of the week.
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