The latest data for the UK manufacturing sector has shown a slower than expected pace of growth, and seen the pound move lower this morning. Sterling has dropped against most of its major peers barring the Australian dollar and fallen back near the 1.25 handle against the US dollar. The FTSE 100 is trading little changed on the day after opening higher but fading back in the past couple of hours.
PMI hits four-month low
A survey of purchasing managers in the manufacturing sector showed the lowest level of optimism in March since November last year, with the index falling to 54.2. With a rise to 55.1 expected from last month’s 54.6 the release is something of a disappointment. However it should be pointed out that historically speaking a reading around this level would still be considered strong and it remains comfortably above the 50 level, which marks the line between expansion and contraction. Tomorrow sees the construction equivalent released before we receive the Services PMI on Wednesday which is the most important of the three. Put in the proper context and taken on its own, this morning’s number shouldn’t start any alarm bells ringing but it does increase the importance of the services number. If there’s more disappointment on Wednesday then there could be a case made for some concerns surrounding the pace of current economic activity.
Quiet start to the second quarter
UK blue-chip stocks have made a fairly subdued start to Q2 with the FTSE 100 trading lower by 4 points at the time of writing. The market is currently on its longest winning streak since 2011 and posted a fourth successive quarter of gains on Friday, rising by 2.5% since the turn of the year. With European markets enjoying a bright start to the week with the German Dax posting a 2017 high, shares in London are lagging a little, perhaps due to soft Chinese data released overnight. The Caixin Chinese manufacturing PMI fell to 51.2 in March and due to the large weighting of mining stocks on the FTSE, the index is arguably just as sensitive, if not more, to developments in the Far East than on these shores.