Pound soars to seven-week high after uk services sector posts biggest rebound in 20 years

After an abrupt contraction in July following the outcome of the shock Brexit vote, the services sector recovered in August, enjoying its biggest monthly increase in 20 years.

The Markit/CIPS Purchasing Managers’ Index (PMI) for the services sector jumped to 52.9 in August from July’s seven-year low of 47.4, beating consensus forecasts of a reading of 50.

Chris Williamson, of IHS Markit, said: “A record rise in the services PMI adds to the encouraging news seen in the manufacturing and construction sectors in August to suggest that an imminent recession will be avoided.”

However, he reckons it is still “too early to say whether August’s upturn is a dead cat bounce or the start of a sustained post-shock recovery, but there’s plenty of anecdotal evidence to indicate that the initial shock of the June vote has begun to dissipate.”

The pound soared to a seven-week high against the dollar after data showed the UK services sector rebounded sharply in August, following a slump in the immediate aftermath of the Brexit vote.

Stronger-than-expected manufacturing and construction data lifted the pound last week to a one-month high.

 Following the data release this morning, it surged by as much as 0.62pc to $1.3376 against the dollar, its highest level July 15 when it touched $1.3481.

With Wall Street closed for the afternoon due to the US Labor Day break, the pound surrendered some of its gains, edging down to $1.3318 just before 6pm.

After a period of volatility following June’s referendum, UK banks are at their highest point thanks to better-than-expected post-Brexit economic data. High profit shares in india However, Deutsche Bank thinks the “lower-for-longer” interest rate environment is “clearly negative” for the sector in the long-term.

In a sector-wide note, the German bank was particularly bearish towards Royal Bank of Scotland. Low cost high profit business ideas Downgrading it to “sell” and cutting its target price to 170p from 200p, analysts said RBS was most at risk in the near-to-medium term due to already low deposit rates, likely downgrades to loan growth, additional restructuring charges and likely lack of dividend until 2018.

David Lock, of Deutsche Bank said: “RBS is particularly impacted by the current environment we think, in part because it has already made much progress in reducing liability costs.”

Joshua Mahony, Market Analyst at IG, reflects on today’s trading session after the stronger-than-expected UK services PMI caused the FTSE 100 to turn negative as investors reflect on the “impact it will have upon the chances of further BoE action”.

“Early FTSE gains have been erased in what has been a clear reflection of the current market fixation on monetary policy over any other considerations. High profit business ideas in india While the incredible August recovery in the UK services PMI is likely to have significant implications for growth and prosperity, markets instead chose to reflect on the impact it will have upon the chances of further BoE action.

Whip-sawing markets following the Brexit vote have given a lift to Plus500 after the surprise EU referendum result boosted interest in financial spread-betting.

The Aim-listed, Israel-based trading business enjoyed a rise in new customers and trading around the June 23 vote, which sparked a plunge in sterling and sent stock markets on a rollercoaster ride. High profit margin business The referendum, which took place towards the end of Plus500’s first half, helped lift its revenues in the six months to the end of June by 25pc to $158.8m.

Returning to this morning’s services PMI data, Julien Lafargue, of JP Morgan Private Bank, thinks the renewed optimism following the post-Brexit PMI hat-trick might fade rather quickly, as attention turns to next week’s inflation data.

“Given that services represent about 80pc of the UK GDP, today’s release gives a more accurate picture of the real, short term impact of Brexit on the UK economy. High profit small business At this stage, it appears that the combination of a lower GBP and renewed support from the Bank of England (BoE) have dampened the economic shock that was widely expected following the decision of the UK to leave the European Union.

“However, today’s survey points to the strongest output price inflation since January 2014. High profit crops In this context, we will be watching closely next week’s inflation data as this renewed optimism might fade rather quickly and the course of action of the BoE might be altered if prices start rising faster than expected.”

Oil prices swung wildly on Monday morning, surging 5pc in a matter of hours before beating a hasty retreat after rumours of an imminent supply freeze pact between Saudi Arabia and Russia failed to materialise.

The price rallied from around $46.50 a barrel this morning to just below $49.50 as reports hinted that two of the world’s largest oil producing nations would make a “significant” market announcement that traders hoped would be a deal to freeze supply.

But oil prices quickly fell back to $47.40 a barrel within minutes of a joint statement from the two countries that they would set up a ‘working group’ to monitor the recovery of the oil market, rather than immediate plans to tackle the market glut.

The UK supermarket has today announced plans to increase the number of Argos concessions in its shops by 20 before the holidays, having already trialled the shop in ten outlets.

Shoppers at the concessions will be able to pick up goods ordered from Argos online, and place new orders in-store, at the same time as grocery shopping.

Argos’ management team previously admitted that some stores, which had not recently been refurbished, would be relocated. Business with high profit philippines Closures are also anticipated.

Steve Rowe, M&S CEO, said: “M&S has to become a simpler and more effective organisation if we are to deliver our plans to recover and grow our business.

“It is never easy to propose changes that impact on our people, but I believe that the proposals outlined today are absolutely necessary and will help us build a different type of M&S – one that can take bolder, pacier decisions, be more profitable and ultimately better serve our customers.

“We remain committed to investing in store staffing and improving our customer experience and therefore our store colleagues are not affected by this proposal.”

Crude oil futures rose sharply on Monday amid renewed speculation that major producers including Saudi Arabia and Russia could cooperate to tackle weak prices and rein in oversupply.

Saudi Arabia and Russia later on Monday are due to make a joint statement during the G20 summit in China calling for cooperation to support oil markets, several sources with knowledge of the matter said.

One of the sources added Russia would likely attend the upcoming meeting of the Organization of the Petroleum Exporting Countries which will be held in Vienna in November.

Laith Khalaf,of Hargreaves Lansdown: “Since the referendum economic indicators have by and large held up pretty well, and if the positive mood music continues that should put a spring in the step of the pound on the currency markets. Small investment high profit business india More robust economic data would also make the central bank think twice about any further loosening of monetary policy, and may also play its part in determining the future of austerity, as we approach the new chancellor’s Autumn Statement later on in the year.”

“There remains a very real possibility that the economy will increasingly deflate over the coming months as business caution over investment and employment is fuelled by Article 50 being triggered (seemingly most likely in early 2017) and potentially difficult negotiations with the EU coming to the forefront.

“Additionally, it still seems likely that the fundamentals for consumers will diminish over the coming months. Consumers are likely to face less favourable purchasing power as inflation rises and earnings growth is limited by companies striving to limit their costs. List of business with low investment and high profit In addition, unemployment seems seem likely to rise over the coming months.”

Dean Turner, Economist at UBS Wealth Management reckons that despite the optimism today following the sharp rebound in services data in August, it is still “too early to conclude that the UK has escaped the Brexit vote unscathed”.

“We still expect growth to slow to zero in the second half of the year, although the current quarter may be a little stronger than anticipated, followed by greater weakness in the fourth quarter.

“Now that we’ve seen some resilience in the UK economy, many are questioning whether last month’s Monetary Policy Committee decision was the right one. High profit margin business ideas We believe the Bank of England has taken the correct course of action and expect them to ease further before the year is out.”

“After a hat-trick of declines in the month after the Brexit vote, all three PMIs have bounced back healthily the following month limiting the fears that the UK is set to plunge into an immediate post-vote recession. Small items with high profit margin We will have to wait a few months to be sure that this is not a blip but initial reports of higher confidence, export orders and foreign demand are all heartening. High profit cash crops Even dead cats bounce as the phrasing goes…”

“The policy focus must now shift to what Hammond does in his Autumn Statement. Small scale business with low investment and high profit In his letter to Governor Carney in response to the August Inflation Report, Hammond said that he’s ‘prepared to take any steps to support the economy’ and we would hope that the refocus of the UK fiscal stance would allow for lower taxes and increased investment. High risk high profit I would like to see a juicy cut to VAT in Hammond’s Autumn Statement, that while scheduled for November, he would do well to bring forward.”

“The UK services PMI data was very important piece of information for traders today and the data has given a little more information how the world after Brexit looks like. Business ideas with low investment and high profit in india The number has pushed the Sterling higher but it is important not to over emphasize on this reading as we are still far away from a real picture. High profit business in pakistan President Obama’s comments were very important when it comes to Brexit deals and he has made this very clear that the UK is back in the que when it comes to making any deals. Best business with high profit Now, the question is what the Prime Minister will be able to achieve from India and China during her visit for G20 conference. Low investment high profit business Both are very important trade partners and any positive news could boost the sentiment.”

Britain’s dominant services sector returned to growth in August, just a month after the decision to leave the EU triggered a contraction in activity and spurred the Bank of England into action.

Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey, said the latest services PMI data adds to the “encouraging news” seen in the manufacturing and construction sector last year – and suggests that “an imminent recession will be avoided”.

“The three PMI surveys point to a stagnation of the economy so far in the third quarter, meaning much hinges on the September data to see whether the economy contracts or ekes out modest growth.

“It remains too early to say whether August’s upturn is a dead cat bounce or the start of a sustained post-shock recovery, but there’s plenty of anecdotal evidence to indicate that the initial shock of the June vote has begun to dissipate. High profit items Many companies are seeing business return to normal either simply by customer confidence rising or a stoic determination to “Buck Brexit” and carry on regardless.

Following abrupt contractions in output and new business in July linked to disruption related to the outcome of the EU referendum, the latest data signalled a return to growth as companies reported that uncertainty had abated somewhat.

Moreover, the forward-looking business expectations index recovered most of the ground lost in July when confidence took a knock from the Brexit vote amid political and economic uncertainty, albeit remaining weak by historical standards.

Reflecting on this morning’s final reading of the eurozone composite PMI data, which skidded to a 19-month low of 52.9, Chris Williamson, Chief Business Economist at IHS Markit said:

“It’s clearly disappointing to see the final PMI has come in weaker than the initial flash estimate. Products with high profit margins While the overall picture is one of steady but sluggish 0.3% growth in the third quarter, the revised figures indicate that the economy is losing rather than gaining momentum.

“Inflationary pressures are also cooling amid intense competition, and hiring is on the wane as businesses grow more concerned about the outlook.

“Of the four largest euro members, Spain remains the stand-out performer, with the PMIs pointing to another strong quarter of approximately 0.7pc growth despite a slowdown in manufacturing. High profit low cost business ideas Italy and France are meanwhile both only seeing modest rates of expansion of 0.1-0.2pc, though it’s encouraging to see France’s economy recovering from stagnation in the second quarter.

“The slowdown in Germany is perhaps the biggest source of concern, with the PMI pointing to a risk of a further slowing of GDP growth to just 0.3pc in the third quarter.”

Speedy Hire’s biggest investor, Toscafund, has issued a fresh attack on the group’s board for failing to bow to its demands to replace the chairman Jan Astrand with its own candidate, days before shareholders are due to vote on the dispute.

Toscafund, set up by Martin Hughes in 2000, sparked the boardroom battle in July when it demanded Mr Astrand’s removal amid worse-than-expected losses at the building tool rental company. Low cost high profit items It has proposed David Shearer, a former chairman of Mouchel, be appointed to the board.

After the pound surged following last week’s manufacturing and construction data last week, attention shifts to the UK services PMI data this morning.

Connor Campbell, of SpreadEx: “The figure is broadly expected to follow the same ‘recovery’ trend as its PMI peers, with analysts expecting a jump from 47.4 in July to 49.1 in August. Low cost high profit business in india Given, however, the supersized increase made by the manufacturing survey and, to a lesser extent, the better than forecast rise in construction, the services reading may be under a different pressure, something only compounded by the fact it is arguably the most important PMI of the three.”

Jasper Lawler, CMC Markets: “The general expectation is for a rebound in August in line with other indicators like the Gfk consumer confidence. What products have high profit margins If business confidence in the resiliency of the UK economy was the main driver of the turnaround in manufacturing, and not just the devalued currency, then there is scope for another big upward surprise in today’s services PMI.

“If the UKs service sector returns to expansion, the Bank of England’s Mark Carney, Jon Cunliffe, Kristin Forbes and Ian McCafferty will have a difficult time justifying their latest policy action at a hearing of the Parliament’s Treasury Committee on Wednesday.”

Jeremy Cook, World First: “Both the manufacturing and construction PMI numbers from the UK last week showed a rebound from their post-Brexit lows however the services industry is worth 3 times those industries at current levels and therefore represents the most valuable indicator of month-to-month spending in the economy.

“Forecasts of PMIs are difficult at the best of times and we are nowhere near the best of times so placing any value on the consensus estimate of a rebound to 50.0 is rather foolhardy. Small business with low investment and high profit in india As with the manufacturing number on Thursday we will be focusing on price levels and the impact of the devaluation of the pound as well as employment and pay.”

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