Daily Brief

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Dive! Dive! Dive!

Sea change

It was not one of sterling's better days. A miserable UK construction sector purchasing managers' index set a tone of negativity in the morning and the Bank of England governor landed a killer blow during his visit to the seaside. The pound is down by an average of 0.5%.

The construction PMI did the least damage, simply because the sector represents only 7% of the UK economy. Down by five points at 43.1 it was the fourth time in five months that the index had come in below 50, the dividing line between growth and contraction. Business activity and new orders fell at the fastest pace in 10 years.

That little setback was dwarfed by the reaction to Mark Carney's speech at the Local Government Association conference in Bournemouth, which cost the pound half a US cent in 20 minutes. Speaking of "growing concerns over the global economic outlook" he said trade tensions have increased the downside risk and Trump's tariffs could "shipwreck" the global economy. There was little in the speech that investors did not already know, but their takeaway was that a no-deal Brexit would be bad thing and lead to lower interest rates. They awarded sterling another uncontested wooden spoon.

Madame president

The European Council at last produced a list of names for the EU's top appointed jobs. Most of them are unfamiliar to investors: the other one, Christine Lagarde, is nominated to head the European Central Bank.

Although Mme Lagarde is neither a banker nor an economist, but a lawyer and a politician, she does have experience as France's finance minister and for the last eight years has headed the International Monetary Fund. The general view is that she is the "continuity" candidate, sharing Mario Draghi's taste for monetary stimulus and a supporter of his "whatever it takes" approach to preserving the euro.

Mr Carney and Ms Lagarde rather monopolised the financial news on Tuesday. The scanty data added little: Canada's manufacturing PMI was in the contraction zone at 49.2 but ahead of forecast and a tick higher on the month. It made no difference to the Loonie, which is in midfield alongside the US dollar, euro and Swiss franc.

Services PMIs

Australia kicked off the round of services sector purchasing managers' indices with a worthy 52.2, a touch lower on the month but comfortably within the growth zone. Analysts predict that the UK measure will be unchanged at 51.0.

The two other services PMIs from the Far East this morning were also above 50; Japan at 51.9 and China's Caixin at 52.0. The European and US  numbers are expected to continue this pattern; none is forecast to come in below 50. Manufacturers might be struggling but consumers are still buying burgers and haircuts.  

Other ecostats today cover South African business confidence, Canada's balance of trade and US factory orders. ADP's Employment Change number will be closely watched after last month's figure did such a good job of predicting a sharp slowdown in US job creation.

GBP: BoE governor torpedoes sterling

GBP: BoE governor torpedoes sterling

EUR: IMF MD for ECB

EUR: IMF MD for ECB

CAD: Steady against USD and EUR

CAD: Steady against USD and EUR

USD: ADP Employment Change awaited

USD: ADP Employment Change awaited

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