Morning Report: 6 February 2018

February 6, 2018

GBP Sterling continued to head lower yesterday, while global equity markets were a sea of red last night and the Dow Jones Industrial Average saw its largest ever one day fall. Two main themes weighed on sterling, as ongoing political turmoil was compounded by news that the Services Purchasing Managers Index, which tracks reported output growth, had fallen to its lowest level since 2016. This morning the British Retail Consortium released its monthly survey, which showed sales growth of 0.6% year on year and surging price pressure.

EUR Amid yesterday’s equity market carnage the euro continued to pare back its recent gains versus USD, although the single market has opened this morning with a mild rally. Services Purchasing Managers’ Indices were released for a variety of eurozone economies, all showing very healthy reported growth among the surveyed businesses. German Factory Orders surged 3.8% in December, according to data released this morning, and at 09:10 GMT the latest Retail PMI will be released.

USD USD benefited in general from yesterday’s equity rout, but did fall back against the Japanese yen, which is often something of a haven in times of equity carnage. Equities remained under pressure overnight, so today’s price action will be an important indicator of if yesterday’s crash was a blip or the beginning of a new bear market. Yesterday’s main data release was the ISM Non-Manufacturing Purchasing Managers’ Index, which reached a 12 year high as the surveyed companies reported rapid growth, although the news was no comfort whatsoever to equity markets. Today at 13:30 GMT Trade Balance data will be released, followed at 15:00 by the Job Openings and Labour Turnover Summary.

CAD The loonie fell back yesterday, as crude oil prices continued to weaken and the US dollar performed well in general. Today at 13:30 GMT the latest Trade Balance data will be released, followed at 15:00 by the Ivey Purchasing Managers’ Index.

UK news

  • Reuters: Stocks crumble in vicious sell-off as ‘goldilocks’ trade unravels. A rout in global equities deepened in Asia on Tuesday as inflation worries gripped financial markets, sending U.S. stock futures sinking further into the red after Wall Street suffered its biggest decline since 2011.
  • Telegraph: Leaked: The 37 EU rules Britain could be forced to accept during Brexit transition. Britain could be forced to accept nearly 40 EU directives during a two-year transition period after Brexit, according to a leaked Whitehall analysis.

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