Proactive Investors –
- advances 26 points to 8,309
- JD Sports Fashion PLC (LON:) reports improvement in sales growth in second quarter
- Recruiter Hays (LON:) heavily impacted by rapid hiring slowdown
Pound stretches one-year USD high
The pound topped $1.3127 on the back of the PMI reading, up over 0.2% this morning.
And GBP also made more headway against the euro, now up 0.25% at £0.8497.
The Office for National Statistics has also release its weekly experimental data and analysis on economic activity and social change.
This includes numbers of transactions at Pret A Manger stores, which decreased in seven of the 10 location categories monitored in the week, with the largest decrease seen in Manchester stores, falling by 9% when compared with the previous week.
Job ads at Adzuna increased by 2% when compared with the previous week, but were down 16% on a year ago.
Gas and electricity prices decreased, with the system average price of gas and electricity respectively down 7% and 12% on a year ago, according to data from National Gas Transmission and Elexon.
Average daily flight numbers were broadly unchanged compared with the previous week but up 4% on 2023.
UK economy ‘solid growth’ and easing inflationary pressure
The flash PMI report shows August saw “solid” expansion of the UK private sector, boosted by strong new orders, faster hiring, while inflationary pressures moderated.
Survey respondents noted that more upbeat assessments of the domestic economic outlook had spurred efforts to boost business capacity, the report says.
On inflation, input costs rose at the slowest pace three and a half years, which S&P says was largely down to a “considerable easing” in cost pressures within the service sector, offsetting higher freight and raw material costs in manufacturing.
Chris Williamson, chief economist at S&P Global, says: “August is witnessing a welcome combination of stronger economic growth, improved job creation and lower inflation, according to provisional PMI survey data.
“Both manufacturing and service sectors are reporting solid output growth and increased job gains as business confidence remains elevated by historical standards.
“Although GDP growth looks set to weaken in the third quarter compared to the impressive gains seen in the first half of the year, the PMI is indicative of the economy expanding at a reasonably solid quarterly rate of around 0.3%.
He says the easing inflationary pressures were notabe in the service sector, which has been a key area of concern for the Bank of England.
“The latest survey data therefore help lower the bar for further interest rate cuts, although the still-elevated nature of inflation in the service sector suggests that policymakers will move cautiously.”
UK economy improving, finds PMI survey
UK economic growth accelerated this month, according to the ‘flash’ purchasing managers index survey from S&P Global.
The preliminary reading of the for August rose to 52.5, from 52.1 in July, higher than the 52.2 consensus forecast.
It was a similar story for the larger services sector, where the flash PMI reading came in at 53.3, up from 52.5 and beating the 52.8 estimate.
The flash UK for August therefore rose to 53.4 from 52.8, ahead of the 53.0 expected.
GBP hits one-year high against USD
The pound is up 0.1% against the US dollar to above $1.31, its highest level since July last year.
This is despite the also strengthening.
is up 0.1% against the euro too, at £0.8509, not a year’s high, though that was seen in late July.
Currency analyst Francesco Pesole at ING says he remains “quite confident about a rebound” in , and there are “two potential triggers”, one today (ECB wage data) and one tomorrow (Bank of England governor Andrew Bailey’s speech in Jackson Hole).
“Markets may be inclined to price out some ECB easing if today’s eurozone wage figures prove sticky again, but PMIs may also have a say in EUR/GBP price action.
“The surveys have been a testament to the growing growth sentiment divergence between the eurozone and the UK, which has helped keep EUR/GBP capped.
“However, markets are clearly more accustomed to negative growth news in the eurozone, whereas a softer PMI read in the UK this morning can have a larger impact on Sonia pricing and the pound.”
ING’s short-term target is 0.86 in EUR/GBP, expecting a move in favour of the euro leg over the coming weeks.
More bad news about the German economy
More bad economic news from Germany, where business activity contracted in August for a second consecutive month and by more than expected.
A preliminary reading of the HCOB purchasing managers index survey showed a reading of 48.5 for August, further into contraction territory from 49.1 in July.
The flash softened to 51.4 from 52.5 in July, while the dropped to 42.1 from 43.2..
JD update ‘reassuring’ says analyst
Today’s update from trainers and tracksuits seller JD Sports was “decent” and “reassuring”, says analyst Clive Black at Shore Capital, with the shares now up 4% to top the FTSE 100.
This follows a “challenging 12 months or so” in terms of the market backdrop, with “a lot going on” for the customers, suppliers and the company too.
“It was not unreasonable to assert that market confidence in the earnings trajectory of the group took a knock in this time and so we see this update as reassuring,” says Black.
However, he notes that the growth figures for the past quarter were helped by softer comparative numbers from last year.
Full-year profit guidance is quite wide and Black says he “would be surprised” to see consensus expectations change much on the back of this update.
European markets on front foot
The FTSE is part of a wider positive trend at the open across Europe this morning, adding to the gains yesterday on both sides of the Atlantic.
A 0.2% gain for the London benchmark is bested by a 0.6% rise for the in Frankfurt, while the in Paris is just above flat.
The continent-wide index is up 0.18%, with JD Sports third on the risers list.
Top is German ticketing giant CTS Eventim, up 10% after the company upped its earnings guidance after growth accelerated in the second quarter.
Instead of a “moderate” increase in EBITDA that was previously indicated, a “significant” increase is now expected for the full year.
FTSE indices mixed
London’s blue-chip benchmark has opened higher on Thursday, with the FTSE 100 hopping up 29 points to 8,302.5.
The is slightly in the red, down 30 points at 21,156.
JD Sports is top of the blue-chip leaderboard, up almost 3% on the back of its half-year update.
Life insurers and other financials are the main fallers, with Investec, Just Group (LON:), Legal & General all down between 2.5% and 3%.
Serco wins defence contract
Outsourcer Serco Group PLC (LON:) has won a $320 million (£245 million) contract with the US Army to work on the US Space Force’s ‘top of the world’ base in Greenland.
The contract is to manage the renovation of the back-up electrical plant at the base, running for four years.
