This morning’s release of the UK manufacturing PMI for July showed the largest drop in more than three years for the economic indicator as the after-effects of the nation’s decision to leave the EU seem to be greater than initially thought. The 48.2 figure was below a previously released flash estimate of 49.1 and marks only the second sub 50 print since early 2013, with 50 marking a neutral line between expansion and contraction.
Busy week of data leading to BoE
The manufacturing PMI number published this morning marks the first of three major releases ahead of Thursday’s Bank of England meeting, where expectations for some monetary easing are once more at elevated levels after the bank decided to stand pat last month. Tomorrow sees construction PMI for July announced at 09:30 before the services figure - which is probably the most significant of the three - is out at the same time Wednesday. A flash release of the services and manufacturing PMI on Friday 22nd July caused the last strong wave of selling in sterling, and the initial reaction to this morning’s data has seen the pound drop to its lowest levels of the day and there could well be more downside leading into Thursday’s meeting
Miners boosted by Chinese manufacturing
The FTSE 100 has started the week brightly, higher by just under 20 points at the time of writing with mining stocks the best performers. Anglo American (LON:AAL), BHP Billiton (LON:BLT) and Rio Tinto (LON:RIO) all feature prominently at the top of the index after manufacturing data from China released in the early hours of this morning beat expectations. The Caixin print of 50.6 was substantially above the 48.8 expected and the 48.6 prior, and marks the first expansion in this indicator for more than a year. Perhaps with an eye on a possible rate cut later this week from the BoE, banking stocks are seeing some early selling this morning with Barclays (LON:BARC) and RBS (LON:RBS) the two biggest losers on the FTSE 100. Lower rates from the central bank will put an additional squeeze on already narrowing margins for banks and this could explain the weakness seen so far.