The UK GDP growth, previously estimated at 0.7% for the quarter, has been confirmed by the UK’s ONS in their bulletin this morning. However, the ONS has revised down its forecast for year-on-year growth. the UK’s recovery over the last year has been weaker than first thought; the UK economy only grew by 1.3% over the last 12 months, not 1.5% as initially predicted.
The business investment data from the UK’s ONS was equally troubling; the main driver for UK business investment appears to be government investment and dwelling investment, with investment in machinery and equipment falling. This suggests that business investment is concentrated on the government and property development, hardly a sustainable foundation on which to base a recovery.
Data released by Europa and the European Central Bank has revealed that loans to the private sector shank by another 2.0% in August, compared to July, illustrating that the ECB’s efforts to stimulate borrowing, through keeping interest rates at record lows, aren’t increasing lending in the euro area. Banks are still reluctant to lend, whilst businesses and individuals are remaining cautious over extending their credit.
Italian retail sales have been published in the morning session, they’ve fallen by 0.3% with an expectation of a rise of 0.3% suggesting once again that the Italian recovery is fragile.
Market snapshot at 10:15 am UK time
The Nikkei closed up 1.22%, the Hang Seng down 0.36% and the CSI down 1.84%. The ASX 200 closed up 0.35%. The Topix index of Japanese shares gained 0.8 percent after earlier dropping by 1.6 percent. The Nikkei 225 Stock Average, which is more influenced by exporters, rose 1.2 percent after erasing a 1.4 percent decline.
The main European markets are down in the London trading session; STOXX index down 0.58%, FTSE down 0.18%, CAC down 0.53%, DAX down 0.36%, whilst the Italian index may have reacted badly to the data on retail sales given that it’s currently down 2.09%; the worst European performer on the day.
ICE WTI oil is flat at $102.73 per barrel, NYMEX natural down 0.17% at $3.49 per therm, COMEX gold is up 0.10% at $1337.50 per ounce, whilst COMEX silver is up 0.16% at $21.92 per ounce.
Equity index futures
The DJIA equity index future is (at the time of writing) up 0.16%, the SPX is up 0.20%, whilst the NASDAQ equity index future is currently up 0.39%, all three indices suggesting that the USA markets will open in positive territory once the New York bell rings to open the markets.
Focus on FX
Sterling dropped by 0.3 percent to $1.6036 in the London session after climbing to $1.6163 on Sept 18th, the highest level seen since Jan 11th. Sterling weakened 0.1 percent to 84.22 pence per euro after appreciating to 83.53 pence on Sept 18th, the strongest level seen since Jan 17th. The pound weakened versus the USA dollar after the ONS government report revealed that the U.K. economy grew less than initially estimated in the year through to June, by only 1.3% versus the estimate of 1.5%.
The yen had dropped by up 0.5 percent to 98.93 per dollar in the London session. It fell 0.3 percent to 133.48 per euro. The U.S. currency rose 0.1 percent to $1.3507 per euro, following yesterday’s 0.4 percent decline. The yen fell for the first time in five days versus the dollar as speculation the Japanese government will consider a corporate tax cut affected demand for the relative safe haven status of the currency.
The New Zealand dollar jumped by 0.5 percent to 82.82 U.S. cents late in Sydney trading from yesterday, when it touched 82.17, the lowest level since Sept 18th. Australia’s dollar gained by 0.2 percent to 93.86 U.S. cents, after reaching 93.39 yesterday, also the lowest since Sept 18th. New Zealand’s dollar climbed versus all of its 16 major peers due to bets that the country’s central bank will be the first among developed nations to raise interest rates.