10 Jan 2018

Market Brief: British businesses in subdued mood

Emily Maguire

Dealing team

According to the British Chambers of Commerce, British businesses are in a subdued mood ahead of Brexit and the economy could suffer as a result. 

Today's data release
  Key levels
10:00 EU unemployment rate   Support Resistance
NFIB business optimism GBP/ USD 1.3496 1.3613
13:15 Canada housing starts GBP/ EUR 1.1065 1.1508
15:00 Fed's Kashkari speaks + job openings
Market overview

According to the British Chambers of Commerce, British businesses are in a subdued mood ahead of Brexit and the economy could suffer as a result. Companies were still struggling with cost pressures towards the end of 2017 and so were reluctant to invest more. The services sector, which accounts for roughly 80% of the British economy, continued to expand at a subdued pace and recruitment difficulties could prove to be the biggest drag on these businesses this year with 71% of services companies reporting that they were struggling to hire new staff. However, we at Investec believe that economic growth will pick-up this year, although modestly, and potentially underperforming most of its peers. The dollar extended losses against the yen this morning after the Bank of Japan announced yesterday that it was trimming Japanese government bond purchases which prompted speculation that it could start to taper its quantitative easing programme. Even though this move was in line with the central bank’s policies to date, the prospect the central bank was poised to begin unwinding its stimulus caused the yen to strengthen against the dollar.

In the latest fallout from Martin Wolff’s new book on President Trump, Steve Bannon, the President’s former strategist, has stepped down from his post as head of right-wing website Breitbart News. Mr Bannon was unable to repair the damage caused by his comments in the book and he was forced out. The incendiary book questioned the president’s fitness for office and accused his son of treason for meeting a Russian lawyer during the presidential election campaign.

The day ahead

We kick off with industrial production, manufacturing output and trade balance for the UK released at 9.30 this morning. Following this we have the three month GDP estimate from the National Institute of Economic and Social Research at 1:00pm. (NIESR) Manufacturing racked up its sixth month of expansion in October and the expectation is for that to continue. There are three Fed speakers today, with Chicago’s Charles Evans, Dallas’ Robert Kaplan St Louis’ Bullard speaking at 2.00pm, 3.15pm and 18:30pm respectively.

Thought of the day

155 years ago today the Metropolitan Railway opened the world’s first underground railway - giving birth to what we now know as the London Underground. The Thames Tunnel, which ran between Paddington and Farringdon, was an engineering marvel, the first tunnel to be built underneath a river and was once even described as the Eighth Wonder of the World. Since then, the network has grown to incorporate 270 stations, 11 lines totalling 250 miles in length and carries over 5million people per day. Although the development of electric trains in 1890 greatly began to improve commuter conditions, such substantial growth has bought with it a number of other problems. It is estimated that over 47 million litres water are pumped from the Tube each day, enough to fill a standard leisure centre swimming pool (25 metres x 10 metres) every quarter of an hour. If, like the London Underground, your business has continued to grow and is experiencing new challenges, please feel free to call the Investec Dealing Desk on 0800 055 6339 who will be more than happy to discuss these with you

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