UK data continues to disappoint markets

Yesterday’s markets

5th September 2017

  • GBP - Construction PMI: 51.1
  • AUD - Company Operating Profits q/q: -4.5%
  • EUR - Spanish Unemployment Change: 46.4K

The UK released the Construction PMI Figure for August yesterday, which disappointed the markets expectations by posting a bearish 51.1. This is the weakest posting for 12 months, as new business continues to decline for the second month running and commercial work levels fall. The report also found employment numbers within the construction sector are rising at the slowest pace since July 2016. The bearish reading and the weekend news of the lack of progress in the Brexit negotiations caused the Pound to reverse its gains from Friday against the Euro.

The tensions between the North Korea and the US continue to rise. US Ambassador, Nikki Haley, said ‘Kim Jong-un is begging for war,’ and mentioned that whilst the US did not want a war, its patience is ‘not limited’. The US has called for tougher sanctions on North Korea from the UN, whilst South Korea’s navy carried out live-fire naval drills this morning, warning North Korea they will strike back if provoked. Japan has started planning a mass evacuation of nearly 60,000 of their citizens who are living or visiting South Korea, in the event of a war breaking out. The markets have continued to flow towards safe haven currencies. 

Today’s markets

4th September 2017

  • AUD - Cash Rate
  • AUD - RBA Rate Statement
  • GBP - Services PMI

The UK was the focus of this morning, with the release of the Services PMI for August, which posted a slight worse than expected 53.2, a 11-month low. Subdued client demand and heightened uncertainty about domestic economic outlook were noted as effecting the business activity growth. For the third month running job creation in the sector continued to grow, to its strongest since the start of 2016. The Pound dropped slightly erasing the pre-release gains.

As expected this morning, the Reserve Bank of Australia kept rates on hold at 1.50% for the 13th month, as the core inflation remains below the targeted 2%-3% range and wage growth remains low. In the statement released after, Governor Philip Lowe mentioned the decision was ‘consistent with sustainable growth in the economy and achieving the inflation target over time.’

Later on today, three FOMC members will be speaking. The first is Federal Reserve Governor, Lael Brainard, who is speaking on the economic outlook and monetary policy at the Economic Club of New York. This will be followed by Neel Kashkari speaking at the University of Minnesota and Robert Kaplan speaking about the national and global economic issues at the Federal Reserve Bank of Dallas.  As all of these members have expressed doubt over the need for another rate hike this year, their speeches will be watched closely by the markets for anything they say to the contrary.