U.K. consumer confidence yesterday marked a fall overnight ahead of the GDP and current account figures. The second quarter current account deficit narrowed significantly from £22.2bn to £16.7bn which was mainly due to the trade account, with imports falling by £3bn and exports increasing by £4.5bn. This paints a positive picture of the mythical rebalancing despite the recent strength in sterling.
Meanwhile, the GDP figures came in line with previous expectations of 0.7% quarter on quarter, though the year on year figure was below the forecast 2.4%. There were a raft of revisions to previous years, suggesting the economy has grown further since 2008 than previously thought.
Euro support fades as risk subsides and data disappoints
The euro was under pressure as equities posted a broad rally and risk sentiment declined. The inflation figures from Europe then continued to weigh as the September number came in at -0.1%, below expectations of 0%. The more inflation continues to look soft, the more chance there is of further stimulus from the ECB, which would be likely to weaken the euro in the near term.
We have a day of manufacturing PMIs to start off the new month – with expectations of a further drift lower – though still expected to be above the 50 expansion mark except for France and Greece.
Dollar strength returns
The US employment figures came out slightly better than expected at 200,000 new jobs, which raises the potential of a better non-farm payrolls figure on Friday and all continues to point to a rate hike in December. The US dollar has been generally strong as focus shifts back to the ever more likely rate hike in December.
In the far east, Asian equities are having another strong day, with the Nikkei 225 up despite a weaker than expected Tankan manufacturing survey. There were slightly better manufacturing figures in China, which have led to modest gains across the spectrum of up to a couple of percent as my screen is a sea of green.
The Hong Kong Monetary Authority intervened again this time selling HKD 12bn to maintain the trading band. They also commented that they have no wish or expectation of any change to the peg, with a new normal growth rate of 2-4%.