Stocks recover from Fed slump; BoE provides no great surprises

Summary:

  • Stocks look to recover from Fed slump

  • ISM misses forecasts; Employment disappoints

  • Stock of the week: United Parcel Service 

  • GBP remains near 2-year lows as BoE tread cautious path 

 

Stocks have recovered today after the post-Fed rout with several of the initial moves seen following the event now having reversed. The US Dollar has also pared some of its gains while Gold has bounced off the lows as US 10-year yields are now firmly lower than they were before the decision was announced.    

 

Today’s seen the focus fall on manufacturing with PMI releases from around the globe released that have further served to support the notion of a slowdown in activity. The last, and arguably the most important, comes from the US with the ISM reading for July coming in at 51.2 down from 51.7 prior. The reading was below the expected 52.0. This now means that 3 of the past 4 releases for this data point have missed forecasts. The sub components of the report were also pretty soft, with employment dropping to 51.7 from 54.7 prior. Prices paid also declined to 45.1 from 47.9 and while new orders bucked the trend in rising to 50.8 from 50.0 the increase is minimal. The employment reading is of particular interest here given that tomorrow with see the release of the latest US jobs report. 

 

Our stock of the week looks in-depth at United Parcel Service and can be viewed in full here

 

There were no surprises in the latest policy decision from the Bank of England with the MPC voting unanimously to keep the base rate unchanged at 0.75%. The Bank stated that it continues to assume a smooth Brexit scenario and in such an outcome it would mean gradual rate hikes. The growth forecasts for the next couple of years have been revised lower while the corresponding inflation predictions are now higher than at their last release. The statement outlined that these detailed projections do not include the possibility of a no-deal Brexit which given the recent political events greatly reduces their relevance and importance. GBPUSD has made a new low for the week today that was less than 100 pips above the post referendum lows of 1.1988

 

The latest look at British manufacturing has served to further reaffirm the notion that the sector is struggling with factory activity stuck at a six-and-a-half year low. A PMI print for July of 48.0 is the 3rd consecutive print in contractionary territory and shows that the global slowdown in manufacturing is taking its toll. Perversely the rising threat of a no deal could see this indicator recover in the coming months with firm’s looking to stockpile inventory creating a short-term improvement, similar to the one we saw in the first quarter of the year when the Brexit deadline was 31st March.   

 

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