German Manufacturing PMI rebounds in August
German Manufacturing PMI rebounded in August to hit 59.3, the third highest reading since 2011.
A reading above 50 signifies expansion and a reading below 50 points to deterioration in the sector. 59.3 is a bumper reading from Germany, far outpacing Manufacturing PMI in China which came in at 51.4 and the Eurozone which saw a respectable reading of 57.4.
The latest instalment of manufacturing data will further fuel the argument the ECB’s stimulus program has done its job in supporting the economy and it will soon be time to start tapering bond purchases.
Mario Draghi has been in the spotlight recently as the market tries to gain an insight to his thinking the nature of the bond purchases wind-down. Draghi has been careful in his approach however as he has gained a reputation of talking markets up or down and any comments could cause unintended market moves countering his real intensions.
“While forward guidance is a useful instrument, recent research has highlighted that its effectiveness can be improved if combined with other non-standard monetary policies,” Draghi said last week at the Jackson Hole symposium
The ECB is due to meet next week but many analysts don’t see any confirmation of changes to bond purchases until October.
Zoopla acquires property marketing firm Ravensworth
Zoopla owner ZPG has acquired property marketing company Ravensworth in push to create a one-stop shop for their property partners.
Ravensworth provides print and digital marketing campaigns to property companies offering services such as brochure design and printing, property guides and mail campaigns.
“We are delighted to announce the acquisition of Ravensworth, which gives us a market-leading position in the provision of on-demand print and creative marketing services to UK estate and letting agents. In keeping with our strategy, by combining Ravensworth’s products with our sales and marketing capabilities we will be able to offer our partners a fully integrated, best-in-class print solution and once again confirms our position as the most effective partner for UK property professionals,” said Alex Chesterman, CEO of ZPG.
ZPG also owns uSwitch, PrimeLocation and Hometrack. The acquisition of Ravensworth will strengthen ZPG as a multichannel media company covering the housing market and household bills.
Shares in ZPG PLC rose 2.3% to touch 361.8p in the initial reaction to the deal.
ZPG is up around 20% over the past year but still 8% off highs of 394p printed in March of this year.
EUR/USD retreats from highs after ECB warning
The Euro has fallen over 200 pips from highs helped lower by a Reuters report suggesting ECB officials were unhappy with the strength of the single currency.
The ECB is due to meet next week in a highly anticipated meeting which could set the path of QE tapering. Today’s report implies there is a preference for a slower shallower reduction in bond purchases than the market has been pricing in.
Dollar bounce
The dollar has also strengthen after weeks of decline helping to push EUR/USD back from multi-month highs. Some analysts think that we have already seen a short-term top and EUR/USD is likely to drift lower. “We expect several more rate hikes by the Fed this year and the next. A softer message from the European Central Bank (ECB) aimed at avoiding further euro strength is not that unlikely at the next meeting. We think this has the chance to re-establish relative monetary policy expectations as the dominant driver of EUR/USD and support the dollar in the coming months, especially considering the potential for a reversal of current positioning among speculative accounts,” said Richard Falkenhäll, Senior FX Srategist at SEB who has a year end target of 1.14.Sterling drops as Brexit talks remain in stalemate
Sterling sank against the dollar on Thursday as Barnier said there had been ‘no decisive progress’ in Brexit negotiations.
The lack of progress will unnerve markets who are looking for any semblance of cooperation that could avoid a so called ‘hard-Brexit’.
“The risk of no transitionary agreement seems to have increased today given the strong word’s from Barnier, the EU chief Brexit negotiator. His not unexpected comments has led to a modest weakening in Sterling, however it also increases the chance of the UK exiting the EU in a disorderly fashion,” said Shilen Shah, Bond Strategist at Investec Wealth & Investment.
“The key hazard for markets is that today’s disagreement is an indicator of where future negotiations are heading, with the danger that the risk-premium on UK assets will widen if the talks implode with no agreement.”
GBP/USD has been resilient throughout August as the UK government holidays and the dollar weakens in the face of unconventional behaviour in Washington DC.
Chinese manufacturing activity jumps
The Chinese manufacturing sector expanded faster than economists expected in August.
Official Chinese PMI came in at 51.7, higher than the 51.3 consensus of analysts polled by Reuters.
The reading was also higher than July’s reading of 51.4.
There has been concern that high levels of debt and efforts to control a rampant property market would begin to curtail growth in the world’s second largest economy.
Miners Rally
China is the world’s largest consumer of base metals and FTSE 100 miners reacted positively to the release with Antofagasta, Rio Tinto, KAZ Minerals and Anglo American rising between 2%-5% in early trade on Thursday. Despite the initial exuberance in markets, many analysts were still pessimistic about Chinese economic growth saying tighter controls from the authorities would ultimately dent growth and possibly incite financial instability.Strategic Pipeline Income Fund Fast Fact Sheet
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Bundesbank research says ECB purchases ineffective at increasing inflation
Research from the Bundesbank published on Friday suggest that the European Central Bank’s quantitative easing program is ineffective at increase inflation over longer periods.
It did however note that QE was useful for short term financial stability but the lasting impact was largely negative.
“We find that ECB balance sheet policies, in the form of direct asset purchases, bring down financial stress for some periods after the shock,” the research summarised.
“This positive effect is reversed thereafter as stress increases above its pre-shock level.”
“At the same time, asset purchase shocks have an expansionary effect on economic activity, while the effect on prices remains insignificant.”
Germany has been opposed to QE since its inception and has been critical of the ECB.
“We are not reaching our goal of increasing trust in the ECB and its monetary policy” said Hans Michelbach, chairman of the CDU finance committee last year.
Despite its critics in Germany many would argue Mario Draghi program has been effective in increasing economic activity and supporting markets.
Oil price rises following decline in inventories
Oil prices have pushed higher after US crude inventories declined by 3.3 million barrels suggesting the supply glut may finally be easing.
The Energy Information Administration said total US stocks fell to 462. million barrels. Another gauge of oil stocks, Cushing Oil Inventories, fell to 56.54 million barrels of oil down from 57.04.
Total US oil stocks peaked in March at 535.5 million barrels and the fall in inventories has been accompanied by a drop in the Baker Hughes.
The North American Rig Count peaked at 958 in July of this year after increasing from a low of 404 in June 2016
WTI Oil prices are up over 2% from lows of $46.62 printed 17th August.
Scotland’s budget deficit drops to £13bn
Scotland’s budget deficit has dropped over the past year, falling to £13.3 billion from a revised figure of £14.5 billion the previous year.
According to the figures from the Government Expenditure and Revenue Scotland (Gers), the figure represents an 8.3 percent share of Scotland’s GDP.
The Gers figures put Scottish public sector revenue a £58 billion, 8 percent of total UK revenue. As whole, the UK has a budget deficit of £46.2 billion, or 2.4 percent of GDP.
Just £208 million of Scotland’s revenue over the year came from its oil and gas industry in the North Sea, showing the industry is continuing to recover slowly from the oil price crash. In 2012, the North Sea brought in revenues of £8 billion.
However, Scotland’s non-North Sea revenue increased by 6.1 percent, to £57.8 billion from £54.5 billion the year previously.
Are UK banks too innovative for consumer tastes?
Banks have been plunging money and time into developing innovative new products and online offerings, but are they falling short on customer service?
According to the results of the latest survey from FleishmanHillard Fishburn, the answer is yes. It seems whilst banks are good at offering new products and keeping up with changing technology, they are falling far short on customer care and basic value.
Using a specially selected sample of 1064 ‘engaged consumers’ – UK adults 18-55+ who are politically engaged, actively share news about businesses on social networks, buy shares or already engage with a brand or company – the survey found a wide fap between consumers’ expectations and their experience.
Expectations of innovation for the banking industry were almost five times lower than those of customer care, suggesting that, though banking is increasingly done online, people still have high expectations of their banks in this area. Customer care was actually the highest expectation for the industry, comprising over one-third of expectations.
But banks are not meeting these expectations. In fact, Banking has the largest gap of any industry studied; no company exceeds customer expectations. People feel that banks are paying too little attention to caring for their customers while they’re seen to be delivering far more on innovation than expected, an area for which most people had lower expectation of the industry.
As banks continue to innovate, customers move increasingly to digital platforms, and disrupting start-ups like online-only banks Monzo and Atom put pressure on the industry, this issue is only likely to get more critical. Businesses must start to think about a strategy to effectively communicate why their programmes of innovation are necessary to keep up with the competition, but which clearly explain why they’ll also lead to better experiences for customers.