In the UK, with Brexit on pause we await the results of the 12th Dec General Election, all eyes now turn their attention to economic data. The UK Manufacturing PMI reading at 49.6 in October is better than expected but still below the marker separating expansion from contraction. The most worrying concern from the figures is the increase in job losses from the sector. Job losses were seen for the seventh consecutive month in October, however, the majority of attention will now focus on the upcoming General Election. Prime Minister Johnson rejected the Brexit Party’s offer of an alliance and Sterling lost some territory amid fears that votes could leak from the Conservatives and potentially increase the risk that the current Brexit deal would be rejected. Over the weekend, YouGov released their latest polling which showed Labour have narrowed the gap gaining 6 points, Conservatives gained 3 points whilst the Lib Dems lost 3 points. There is still a long way to go on this and whilst the Conservatives have a lead in the latest opinion polls, there is no certainty that this translate into an overall majority.
Looking to the day ahead, much of the focus in the UK will be on the election of a new speaker of the House of Commons following the stepping down of John Bercow last week. In terms of economic data, it is fairly light today with the release of manufacturing surveys from a number of European countries. The UK may focus on the construction PMI for October, which is expected to see the headline balance stay below the key 50 level but due to the proportional weight of the sector to the wider economy this may be ignored.
FOMC indicates a pause to cutting cycle
In Europe, the October Eurozone Services PMI and the readings for France and Germany are due and expected to be revised slightly higher as well as Eurozone retail sales which are also set for release. The market is watching European data following the restarting quantitative easing.
US Services PMI declines
Following the US rate cut earlier in the week where the FOMC indicated that they would now be pausing their cutting cycle, all eyes were on the all important labour data. US private employers added 125,000 jobs in October, slightly above economists’ expectations of 80,000; which would have been the lowest number since March. The unemployment rate ticked up to 3.6 percent from the 3.5 percent recorded a month earlier as expected. Whilst these number were positive the manufacturing index was not as encouraging. US manufacturing showed the sector continued to contract in October, the third straight month and worse than economist forecasted. However, the number has done little to the expectation that the FOMC will hold interest rates at December’s meeting. Currently the CME FedWatch is showing a 91.9 percent probability of a pause.
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