Market Open Comment
The U.K. economic calendar has so far seen a relative quiet start to the week, but today this looks set to change, with a number of medium impact releases which could attract the attention of investors.
Both industrial production and manufacturing production data could be of particular interest to investors, as they continue to assess the health of the British economy post Brexit. October’s manufacturing output only rose by 0.1% month on month, which was surprising given the relative buoyancy of activity indicated by the manufacturing PMI’s. November is expected to give a reading of 0.3%. Whilst this isn’t a standout headline figure, it will be the 7th straight month of expansion.
Industrial production is expected to have increased by 0.4% month on month, after stagnating in October with 0% growth.
Soft data, which refers to the PMI figures, suggest that activity picked up in November. The manufacturing PMI for November was particularly strong as growth accelerated to the second highest figure in 3 ½ years, boosted by higher overseas demand as the global growth story continues. However, a fall in car production may hinder the figure.
Manufacturing to push pound back to $1.3580?
The pound has had an encouraging start to 2018 and remains comfortably above $1.35 despite recent dollar strength and a sharp selloff in the pound in the previous session. A better than expected reading from manufacturing and industrial production could boost hopes of stronger economic growth for the quarter and therefore lift sterling, pushing the pound back towards the recent resistance seen at $1.3580.
Sainsbury to report
The FTSE futures are pointing to a mildly higher start as the top index continues to hover close to its all time high. Retailers have been in focus this week and will remain under the spotlight on Wednesday as Sainsbury (LON:SBRY) and SuperGroup/Superdry give updates. Yesterday saw Morrison’s give a better than expected update with sales higher than expected over the crucial Christmas period. Data from the British Retail Consortium also showed that the U.K. consumer continued to spend more than expected and on Monday Kantar Worldwide said Sainsbury sales grew 2% in the 12 weeks to 31 December. With this in mind, investors will be feeling optimistic that Sainsbury, like Morrisons (LON:MRW), will surprise on the upside. However, it is worth keeping in mind that history shows Sainsbury has a rather erratic sales momentum.
Construction output to disappoint?
Construction firms will also be in focus on Wednesday as both construction output data and a trading update from Taylor Wimpey (LON:TW) are due. Construction output dropped heavily in both September and October, although soft data suggests that construction may have held firm in November. Month on month construction is expected to have picked up 0.7%. This may be a little optimistic and construction could drag on GDP data for the quarter.