Another brick in the wall

5 October, 2016

The gauge of business activity in the UK construction sector surprised investors as it was rising first time in five months in September, reported research company Markit on Tuesday. Research firm Markit and the Chartered Institute of Purchasing and Supply (CIPS) reported that the purchasing manager’s index in the construction sector rose to 52.3from a previous 49.2 level in August. The headline figure beats analysts’ consensus projecting the index at 49.0 in September. The index value that stays above 50.0 level signals expansions, yet if it is below this mark the index shows a contraction in the business activity.

The construction sector grew for the first time since May 2015 due to the rapid increase in the number of new orders in the last six months. According to Markit, the strong growth in houses construction was set off by the decline in commercial real estate market.

“Flexible conditions in the housing market and the rise in residential construction activity improved the performance of the construction sector for the first time after the referendum on membership in the EU”, – said a senior economist at Markit Tim Moore. “A number of respondents indicated that the customer concerns about Brexit tail away, although it still remains one of the factors restraining the pace of construction of commercial real estates” Moore noted. He stated that the optimism among construction companies are based on accelerating the growth of new orders and positive economic data in general.

The data failed to transmit any optimism to the British currency which fell to the three-decade low as the UK Prime Minister stoked concerns about the “Hard Brexit” hinting on possible measures in kerbing the immigration to the country. Such turn may cut access from the UK to EU as a single trade market, hurting the exporters.

Meanwhile, the European stock markets grow propelled by the abrupt weakness of the Pound. FTSE 100 stock rose 1,28% hitting new highs, Euro Stoxx 50 rose 0.83%, France’s CAC 40 rose 0.96%, while Germany’s DAX rose 0.71%.

Greenback index rose above 96.00 ahead of employment report on Friday, fueled by upbeat ISM Manufacturing report released on Monday, signalling about accelerated expansion of the sector. All majors feel against the US currency with the biggest decline seen on Swiss Franc and Japanese Yen. EUR/USD fell by 0.35% to 1.1172, GBP/USD reached 1.2750, recoiling to 1.270 with a strong bearish bias weighting on the British currency.

Crude prices retreat though keeping footing above $50 per barrel. Despite statements Oil producers continue to boost supplies, the market is supported by potential OPEC deal at November meeting at Vienna.


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