PMI data fails to distract from trade war nerves

The FTSE fell sharply on the open, maintaining losses across the session as investors are no longer showing interest in buying the dips. With trade war fears intensifying and commodities on the back foot, not even a significantly weaker pound was sufficient to lift the FTSE as risk off moves dominated.

Miners traced metal prices lower after data showed a slowdown in Chinese manufactured exports just days before the deadline for the levying of US trade tariffs on imports from China. 

The fear is that if manufacturing is only just in expansion without the tariffs, a very quick downward spiral into contraction once the tariffs begin is a very real possibility. As a result, the heavyweight mining stocks in the FTSE could be in for a volatile summer.

UK PMI higher but clouds forming on the horizon

Manufacturing PMI data painted a mixed picture, failing to inject any tranquillity into the markets; markets which were already jittery over the worsening trade conflicts. The UK manufacturing pmi ticked higher in June to 54.4, up from May’s 54.3 and beat expectations of 54. 

However, clouds are forming on the horizon as the data showed that new orders slowed, and companies are increasingly raising their output to build inventories or fulfil older orders. 

This is not a sustainable position, demand will need to pick up substantially if we want to avoid a slowdown in output growth. However, demand is unlikely to pick up for the time being with Brexit uncertainties still rife. 

So, whilst manufacturing managed to keep its head above water in June, it will be necessary to look towards other sectors to boost economic growth in the second half of the year.

Under normal circumstances a better than expected print in manufacturing PMI’s would give the pound a boost. 

However, we are far from within normal circumstances. A softer sterling post release reflects Brexit nerves and heavy concerns over the health of the UK economy are driving price action in the pound, whilst the stronger dollar is doing little to help. In the end manufacturing pmi provided little distraction from trade war fears.

US Manufacturing ISM data keeps dollar elevated

The dollar charged higher on Monday, supported by not only its safe haven appeal in the current risk off environment, but also by signs that the US manufacturing sector is at its strongest in four months. 

US manufacturing ISM data showed that the sector pushed higher, beating analysts’ expectations despite the current trade war woes. Even though there is huge uncertainty surrounding US trade policy, the US economy continues to go from strength to strength.