The UK blue-chip stock index, the FTSE 100, has opened for the first time this week and trades at a similar level to where it closed before the long weekend. Barring a dramatic reversal today or tomorrow, the market will close higher for a third successive month, and in doing so will post its longest monthly winning streak in several years.
A large part of the rise can be explained by the drop in the pound, which is again showing some weakness this morning.
Slowdown in UK lending
With the main UK economic releases of the week being the manufacturing and construction PMIs for August scheduled for Thursday and Friday respectively, traders are still fervently scouring data points in an attempt to ascertain the impact on the UK economy since the leave vote prevailed in the EU referendum.
The weakest increase in consumer credit - which includes credit cards and personal loans - since August 2015 was seen last month as the metric, rising by only £1.18 billion in July.
Some releases such as retail sales - which rose strongly over the same time period - seemed to suggest little by the way of weakness in the fallout from the referendum, but this morning’s release that showed a 5% drop in mortgage approvals suggests calls of little tangible adverse effects were premature.
Banking stocks rise, miners fall
One of the best performing sectors so far this morning is the banks, with HSBC (LON:HSBA), Barclays (LON:BARC) and Lloyds Banking Group (LON:LLOY) all enjoying a bright start after the long weekend. Ashtead Group (LON:AHT) is leading the index at the time of writing, with the tool rental company up by a little over 2%.
At the other end of the index is Antofagasta (LON:ANTO) followed by Randgold Resources (LON:RRS) as the price of precious metals turned lower following Yellen’s Jackson Hole speech on rising rate hike expectations.
The rise in the US dollar accompanying this has weighed on most commodities, and therefore it’s little surprise that mining stocks such as Rio Tinto (LON:RIO) and BHP Billiton (LON:BLT) are also under pressure.
Former Governor criticises remain campaign forecasts
Mervyn King, the predecessor to Mark Carney as the Governor of the Bank of England, has stated that the Brexit may in fact place the UK in a better position to rebalance the economy. These comments come in contrast to this morning’s lending figures, but it should be pointed out that Mr. King was referring to the long-term rather than any immediate effects.
The sharp drop in sterling since the referendum could lead to a rebalancing of the economy from consumer spending to exports, and in doing so create a more sustainable future according to the former Governor.