October 25, 2022

Daily Report 25/10/2022

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The latest UK PMI business confidence data recorded a decline in the manufacturing sector to a 29-month low of 45.8 from 48.4 previously and below consensus forecasts of 47.9. The services-sector index also posted a 21-month low of 47.5 from 50.0 and also below market expectations of 49.6. There was a slide in new orders on the month and overall business confidence slumped to 30-month lows amid underlying fears over the outlook. There was a net easing of cost pressure and the rate of increase for prices charged retreated to the lowest level since August 2021. Political developments remained important with former Chancellor Sunak confirmed as new Conservative Party leader and will officially be appointed as Prime Minister on Tuesday. Markets will want reassurance over no changes in Chancellor with Sterling little changed in early Europe as equities held steady.

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The German composite PMI business confidence data was below expectations and remained firmly in contraction territory, reinforcing fears over the domestic economy. The Euro-Zone manufacturing index declined to a 29-month low of 46.6 for October from 48.4 in September and below expectations of 47.8 while the services-sector index declined slightly to 48.2 from 48.8 and a 20-month low, but in line with market expectations. There was a sharp slowdown in new orders growth while business confidence remained weak. Supply-side shortages eased, but there was still strong upward pressure on prices with much stronger than pre-pandemic pressures. The data reinforced unease over the Euro-Zone outlook and limited potential for net Euro support, although lower gas prices provided some element of optimism.

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The US PMI manufacturing index retreated to a 28-month low of 49.9 for October from 52.0 the previous month and below consensus forecasts of 51.0. The services-sector index dipped to 46.6 from 49.3 and significantly below expectations of 49.2. This was a two-month low for the index and the fourth successive reading below the 50.0 level. New orders edged back into contraction territory with a sharp decline in exports.There was a slightly increased cost burden, but output charges increased at the slowest rate since December 2020.Significantly, there was a sharp decline in business confidence for the month to the lowest level for over two years and one of the weakest readings on record. The dollar was resilient following the data, but there were still important reservations over selling the Euro ahead of Thursday’s ECB council meeting with expectations of a further 75 basis-point rate hike.

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