Today's data release Key levels
09:00EU services and composite PMI SupportResistance
09:30UK services and composite PMI
10:00EU retail sales1.08301.0930
12:30US Fed’s Brainard speaks on economic outlook and monetary policy    
Market overview

At the UN an emergency meeting was held by the Security Council. Despite America threatening to flex its muscle, saying its patience is ‘not unlimited’; Kim Jong-un remains undeterred and has been accused of seemingly ‘begging for war’. The view of the Americans was staunchly opposed by the Chinese who are calling for more diplomatic efforts. The US government called China’s proposal ‘insulting’ and tensions remain high on the Korean peninsula, with South Korea conducting its own tests in reply, launching missiles from the ground and the air yesterday.

Brexit negotiations have faced further criticism for their slow progression. This time the head of the EU negotiating team, Michel Barnier, complained about the pace of progress. Britain and the EU remain far apart on a range of issues, with the Europeans wanting to resolve the contentious issues first, such as the size of the divorce bill and the jurisdiction of the European High court on EU citizens living in the UK, whilst Britain would like to discuss a future trading relationship with the EU at the same time. In another development, Theresa May is reported to be set to make a mystery ‘intervention’ later this month which could wind up delaying the next round of Brexit talks for a week or so.

According to the British Retail Consortium numbers, total retail sales were up 2.4% y/y in August, a step up from the 1.4% y/y rate in July. The figures were helped by a weak August in 2016, but even so point to consumer spending continuing to hold up, at least on a values basis, despite the squeeze to household real spending power. In other news the RBA held rates at 1.5% overnight.

The day ahead

On the data front, yesterday it was a very quiet start to the week what with it being a Dollar Holiday as well. The day’s main release, the UK Construction PMI declined yesterday to 51.1 from 51.9 previously (52.0 was expected). Commercial development remained by far the worst performing category, with business activity falling at the fastest pace since July 2016. With the Construction sector only accounting for around 6% of the UK economy the Sterling sell off was muted, however today’s UK Services PMI, which covers more than 75% of the UK economy, will be big one to watch out for. Markets will be hoping the index follows Friday’s manufacturing index and posts a strong reading above the 53.5 consensus. Also watch out for the final Eurozone Services PMI and Composite PMI as well as a raft of US data in the afternoon including US Factory and Durable goods orders.

Thought of the day

‘Good things come to those who wait’ is not an unfamiliar quote in the rugby circles. It is also not uncommon to see the Guinness queue being longer than most as you need to wait for the drink to settle before being served, from there the quote. Who would have thought parallels between an on-line payments system and beer was possible but the wait is over and we can now introduce our new on-line payments functionality. The good news is that you do not need to wait in a queue to experience it, simply log-in, click on the payments icon on the top function bar and off you go. If you want to find out more please feel free to call the dealing desk on 0800 055 6339 and one of us on the dealing desk will run you through the full functionality.

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