UK Manufacturing Growth Surges
Positive data on the UK’s manufacturing sector was released last week, showing that the sector grew by 0.7% in September against the previous month. This was significantly more than the 0.3% predicted by analysts. On an annual basis, there were strong increases in the production of computer equipment and machinery, which rose by 9.7% and 9.2% respectively. The stronger data is suggesting that the slowdown in consumer spending is being offset by the industrial sector. However, construction activity remained weak, contracting 1.6% in the month, faster than expected. Overall, the preliminary estimate for GDP growth in the third quarter remained unchanged at 0.4%. Improvements in net trade as a result of an attractive currency are beginning to be seen, as both foreign companies are looking to the UK for suppliers and UK companies are increasingly making purchases domestically.
US markets and the dollar paused for breath last week as hopes for corporation tax reform before Christmas looked unlikely. The prospect of lower US corporation tax and a potential deal to repatriate the overseas earnings cash hoard has buoyed global markets over the last several weeks. However, Republican efforts to push through the necessary reforms have been slower than expected. It remains likely that there will be some tax reform during the Trump presidency; however, the magnitude and timescale of these remains unclear.
A corruption crackdown in Saudi Arabia continues, with arrests now totalling more than 200. The suspects include princes, prominent businessmen and former senior officials, with allegations relating to at least $100bn in corruption. The speed and scope of the crackdown has taken many by surprise and although it has harmed investor confidence in the short term, stamping out corruption is an efficient way to move towards the more competitive economy that the government is aspiring to. Speculation over the potential flotation of a 5% stake in the state oil company Saudi Aramco continues, with the most likely candidate as a listing being London. The company is estimated to be worth $2tn, and any flotation would be marked as the largest IPO in history.
|UK 10 Year Gilt Yield||1.26||1.34||0.08||6.3%|
German GDP and inflation figures for the UK and US will be released on Tuesday, followed by UK retail sales on Thursday.