Service sector completes hat-trick of beats

A better than expected service sector reading has completed a hat-trick of above forecast surveys for the UK economy in recent days adding support to the BoE’s calls that the slowdown seen in Q1 was temporary. Today’s data is the most pleasing of the trio, not only in that it is the biggest beat but also because the service sector represents the lion’s share of UK economy. The print is the highest since February and indicates that Q2 GDP is expected to grow at 0.3-0.4%.

The pound has jumped to its highest level of the day since the release and has risen back near a 2-week high against the US dollar.  

RBS falls as government cuts stake

Shares in the Royal Bank of Scotland (RBS) have fallen more than 3% as the government has begun the process of offloading its current 70.1% stake. The government plans to reduce its holding to zero over a five-year horizon which with a  forecast £3b worth of stock to be sold per year. The taxpayer looks set to foot a pretty heft the bill here with 502p the average purchase price paid to bail out the bank a decade ago and shares trading in the low 270s today. Back in 2015 the government managed to offload a smaller stake at 330p a share, but it looks like a fair chunk of the £45B paid in 2008 will be lost.

In terms of the outlook for RBS shares going forward, it’s hard to envisage too much upside when everyone knows there’s a big seller lurking overhead. The question is more how well it holds up in the face of this selling; if it can withstand it then that bodes well going forward but it could well mark an end to the run higher seen since the 2016 lows which has seen the stock almost double in value.   

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