The pound has fallen back below the 1.34 handle against the US dollar this morning after the release of the manufacturing production month-on-month for July. Given the decline in the PMI equivalent for the same period this reading doesn’t come as too much of a surprise, and this shouldn’t be misinterpreted as contradicting the recent strong data points as it refers to a prior month. Nonetheless the reading has curbed some of the enthusiasm in sterling seen of late, and seen some small scale selling.
Attention turns to the BoE
The other major event of the day for UK instruments comes this afternoon, as Bank of England Governor Mark Carney and members of the MPC testify on the inflation and economic outlook before Parliament’s Treasury Committee. The recent strong data has led to expectations for further monetary easing at this month’s meeting to be dampened, but with the central bank already showing they are actively trying to soften the blow to the economy from the Brexit, any allusions for or against further actions could cause heightened volatility in the pound and the stock market. As far as inflation is concerned a steep rise in expectations could hinder future plans for a more accommodative monetary policy, but with Mr. Carney already stating he would be willing to tolerate a short-term rise above the bank’s 2% target, the recent uptick shouldn’t prove prohibitive to policy adjustments in the near term.
UK stocks flat on the day
The FTSE100 is trading little changed from yesterday’s closing level so far this morning with an early attempted rally being met by some selling back. Despite the benchmark as a whole remaining flat, there’s been some large moves in individual stocks with Ashtead Group (LON:AHT) soaring higher by approximately 7.5% at the time of writing, with the construction equipment firm posting a 4% increase in underlying profits for the three months to 31st July before the market open. However, given that this focuses predominantly on pre-Brexit conditions it pales in significance when compared to the accompanying comments in the release, which forecast full-year earnings to be better than expected, and this is a more plausible factor as the driving force for today’s rally.
Sports Direct (LON:SPD) shares plummet
Shares in mid-cap firm Sports Direct are off by more than 10% as a continuing theme of bad news has seen investors run for the exit ahead of today’s AGM. Reports that Chairman Keith Hellawell will remain in his role despite several calls for his resignation have been met with disdain by the market, with shareholders still reeling from the incredible 56% decline in the share price over the past year. The retailer has received a lot of negative press of late for its working practices and concerns over corporate governance and pressure has mounted, not only on Mr. Hellawell but also owner and founder Mike Ashley. A third blow to profit expectations has done little to raise the mood amongst shareholders as the company stated that underlying EBITDA would be around £300m in fiscal 2017 - down from £381m a year earlier.