Manufacturing data takes the shine off UK Q3 GDP

• US markets return to form after strong US data

• UK manufacturing drags lower at the first hurdle post Q3 GDP

• EU manufacturing expected to fall lower

• US employment and payroll due after lunch

Risk returned to full tilt as global barometers were broadly bullish. Equity markets were driven by strong US data, a return to business as usual following Hurricane Sandy and signs of a Chinese revival. Consumer confidence rose to 72.2 up from 68.4 in September, while manufacturing grew faster than expected for October despite Sandy’s best efforts this past week. While election fever may be partially responsible for over inflated optimism there is no denying that the US economy is rising to the occasion of the presidential elections. USD pushed steadily throughout the afternoon as data saw GBPUSD retreat to the low 1.61’s.

Private sector employment grew by 158k in October, its fastest pace in eight months while jobless claims fell this week fell to 363k down 9k from last week. All in all the day’s events will bolster Obama ahead of Tuesday’s election. Unemployment and payroll figures due today are the only remaining indicators that may throw a curve ball into the President’s plans for re-election but we expect him to step up to the plate, pick his spot and stick it into the bleachers. Equities finished in green across the board to round off a good day for equities and the US.

UK manufacturing has firmly cast the spot light back onto the BoE and the QE programme. As cited following last week’s Q3 GDP, we’re not out of the woods yet. Weak export demand and low orders saw manufacturing drop from 48.1 to 47.5, well below forecasts of 48.0. It casts a damp outlook on Q4 figures for the UK and adds extra impetus to UK data due early next week. QE may be back in the picture sooner than expected if services and production follow suit. Economists and forecasters weren’t slow in introducing the term “triple dip recession” to future outlook prospects. Considering the UK has just managed to return to growth it’s far too early to speculate on Q4 figures and a return to recession.

Looking to Europe, Spanish manufacturing data was weaker than expected this morning but at this stage markets just shrug their shoulders and get on with it when it comes to Spain.

The day ahead sees manufacturing data for the rest of the European elite where further contraction on last month is the general consensus. We expect unemployment and payroll for the US to present no surprises with the likelihood of GBPUSD pushing lower into the 1.60’s.

Apologises for the lack of video reports. We have been having technical issues but we will be back up and running on Monday

Have a great weekend.

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