Summary:
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Positive remarks from Merkel boost the pound
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Eurozone data remains weak despite topping estimates
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Equities pullback from recent highs
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Stock of the week - Unilever
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Attention turns to key Jackson Hole speeches
The GBPUSD currency pair has literally skyrocketed as Germany’s Angela Merkel said that finding backstop solution ahead of the Brexit date of 31 October was still possible. That’s the first clear sign that EU politicians might be willing to cooperate with Boris Johnson after all and certainly a massive positive for oversold pound. The pair leaped from 1.2150 to 1.2260 in a matter of minutes – the highest level in August.
A plethora of keenly followed industry surveys have shown a slightly healthier than expected take on the Eurozone economy, although it should be stressed that this comes against a pretty low bar. Manufacturing PMIs from France, Germany and the Euro area as a whole all topped consensus forecasts amongst analysts, but the beats were more due to fairly pessimistic predictions rather than a sign of a real strength. The data for Germany for instance remains at recession like levels with the reading of 43.6 making it 8 consecutive prints below the 50 mark which denotes expansion/contraction.
It’s been a fairly quiet session for equities thus far, although there’s been some selling seen into the European close with benchmarks on both sides of the Atlantic turning lower. The catalyst for this weakness seems to have been the soft US manufacturing PMI which dropped to 49.9 - not only the 7th month that this indicator has come in below forecast but also the first reading in contraction territory in almost a decade.
Our stock of the week this time out is Unilever, with the analysis focusing on improving margins, the importance of emerging markets for further growth and the firm upholding its full-year guidance despite a recent disappointment in earnings. The report can be read in full here.
Finally, there’s a major event due before the week is out with the Jackson HOle symposium kicking off in Wyoming this evening. This gathering of prominent central bankers has garnered intense scrutiny since Fed chair Bernanke unveiled another round of QE near the start of this decade. No such moves are expected from incumbent Powell, but his speech at 3PM tomorrow will no doubt be keenly followed. Read our preview of what could be expected here.
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