Us Stocks, Uk Pound Rise
The British pound rose against many of its major peers today after data released today by Markit pointed to UK manufacturing strength in October.
Monday, November 2, 2015 - 00:00
The UK manufacturing PMI jumped to 55.5 in October from September’s reading of 51.8 (revised up from an originally-reported 51.5), reaching a 16-month high in what was one of the steepest gains recorded in more than 20 years of this survey. Output growth improved to its best level since June 2014, while acceleration in new orders also points to continued momentum and manufacturing employment rose for a thirtieth consecutive month. Despite the broad strength of the report, there are still no indications of inflationary pressures, with both input prices and factory gate prices declining. ‘Based on historical comparisons, the survey is consistent with a quarterly rate of growth of around 1%, a vast improvement on what we have seen in recent months,’ said Rob Dobson, Senior Economist at Markit. ‘The big question now is whether this bounceback is a one-off or the start of a sustained re-emergence from recession.’ GBP/USD rose 0.31% to 1.5473, and the pound also gained 0.21% against the Japanese yen and 0.41% versus the Canadian dollar.
Deflationary concerns have been a feature globally for much of the year, with softer energy prices acting as one of the key drags on inflation, and oil prices have slid substantially once again this morning, a result borne from a combination of evidence of contracting manufacturing activity in China and higher oil production in Russia. The Chinese Caixin manufacturing PMI was released over night and showed the index d at 48.3 for October, up from 47.2 in September, but still indicative of contraction for the sector (the eighth deterioration in condition in a row), with new business declining for a fourth consecutive month., while cost burdens fell for a fifteenth consecutive month. The pace of weakening is slowing, suggesting that recent stimulus measures are beginning to take hold, but for the time being at least we would expect softer demand from China, which is bad news for oil considering China’s position as one of the largest global consumers of the commodity. Meanwhile, Russia announced oil output of 10.78 billion barrels per day for October, a record for the post-Soviet era, which will add to the global oversupply issue. Both US and Brent crude oil futures declined more than 1% in early trading on Monday, US crude falling to $46.10 a barrel.
Stocks opened positively on Wall Street this morning, following on from a bullish stretch in October, the best month in four years for the US stock market. Shortly after the opening bell, the Dow Jones was up 45 points or 0.25% at 17,708, while the S&P 500 Index gained 0.39% to stand at 2087.5. The gains came despite a sizeable fall in Visa ($V) after the credit card company posted earnings short of analysts’ estimates. Share in Visa were down 3.5% in early trading.
It’s a big week in terms of US macroeconomic reports. The Markit manufacturing PMI rose to 54.1 in the final reading for October, climbing from 53.1 in September and hitting a six-month high. Further manufacturing data for the US is due at 10.00 ET on Monday in the form of the ISM manufacturing index. The non-manufacturing side of the economy is covered on Wednesday with the services PMI and the ISM non-manufacturing index, while the monthly employment situation is due on Friday, which will be closely watched as always.
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