The U.K. economy delivers some worrying data, U.S. stocks fall due to political uncertainty, oil slips as a hurricane approaches Texas
The U.K. stats agency the ONS, delivered data which concerned both investors and analysts during Thursday’s trading sessions; GDP Q2 growth came in as expected at 0.3%, keeping annual growth on target for 1.7%. However, based on the current trajectory, many analysts fear the U.K. will struggle to deliver growth over 1% in 2017, many suggest that the impending Brexit is not necessarily the catalyst for the series of bad readings delivered on Thursday; that the U.K. was destined to serve up such poor statistics, irrespective of Brexit. Business investment in the U.K. has now fallen to zero growth, exports and imports have both fallen to 0.7% growth in Q2, private consumption is at 0.1%, whilst government spending has increased to 0.6%. The CBI’s report titled “retailing reported deals”, collapsed to -10 in August, the forecast was for growth of 14 and in an economy with huge reliance on retailing as the UK’s largest employer, this collapse in reported sales could (not only) indicate that sales have fallen, but that lay offs are now imminent.
In other European news Swiss industrial production delivered a return to growth in Q2, coming in at 3.4%, versus the -1.2% recorded in Q1. Despite the UK’s poor data, the UK’s leading equity index the FTSE 100 closed up 0.33% and in Europe the DAX was effectively flat up 0.04% on the day, the CAC fell by 0.03% and euro STOXX 50 closed up 0.18%. EUR/USD ended the day down circa 0.2% at 1.1798, GBP/USD closed down 0.1% having whipsawed in the sessions; falling through S1, to then recover by pushing through R1 to end the day close to the daily pivot point, at 1.2800.
USA news mainly concerned the looming debt ceiling, which must be addressed in September, and the Jackson Hole meeting where Janet Yellen and Mario Draghi will discuss (amongst many other issues), how they can begin to unwind their respective central banks’ balance sheets, and their general predictions for their respective continents’ economic performance, in the short to medium term. This approaching virtual maelstrom assisted by a physical hurricane approaching the USA state of Texas, caused investor sentiment to slip back on Thursday. Crude fell sharply due to Texas being in the eye of the approaching storm as it’s the main offshore state responsible for oil production, the commodity ended the day at circa $47.63 a barrel, recovering from a session low of $47.10, down circa 1.5% on the day. Gold retreated from a session high of $1291 per ounce, to end the day at $1286. The dollar index rose by 0.2%, now closing in on its first monthly rise in six months. USD/JPY rose to 109.53, up circa 0.5% on the day.
Significant economic calendar events for August 25th, all times quoted are London (GMT) time
06:00, currency impacted EUR. German Gross Domestic Product s.a. (QoQ) (2Q F). The forecast is for a reading of 0.6%, identical to Q1.
06:00, currency impacted EUR. German Gross Domestic Product w.d.a. (YoY) (2Q F). The prediction is for annual growth to be maintained at 2.1%.
08:00, currency impacted EUR. German IFO – Business Climate (AUG). There’s a series of 3 IFO readings published for Germany at the same time, this specific index is expected to fall to 115.5, from 116 in July.
12:30, currency impacted USD. Durable Goods Orders (JUL P). Durable goods orders are forecast to contract severely to -6.0%, from the 6.4% growth recorded in June.
14:00, currency impacted USD. Janet Yellen speaks at Fed Conference in Jackson Hole, Wyoming.
19:00, currency impacted EUR. ECB President Mario Draghi speaks in Jackson Hole, Wyoming.