Improved manufacturing PMI surveys have helped to lift sentiment throughout Europe, although the latest UK retail sales data does highlight how the high-street remains under pressure as we head into the festive period.  

  • European markets on the rise as PMI surveys highlight improved outlook. 

  • UK retail sales decline highlights particular weakness for household furniture sales.

  • UK services sector expansion lifts Q4 growth prospects. 

European markets are on the rise as we head into the weekend on a positive footing. Recent concerns around rising covid cases and the emergence of the Delta plus variant appear to have been pushed aside on the presumption that vaccinations will keep hospitalisations low. The Moroccan decision to block arrivals from the UK does provide a warning shot for the travel sector, coming at a time when rising energy costs already threaten margins across the sector. The prospect of an early rate rise from the Bank of England has helped keep the pound elevated, with a decline in September retail sales doing little to bolster support for high street names that have been faced with a myriad of concerns. Perhaps unsurprisingly it was fuel sales that managed to outperform over the course of September, as shortages brought panic buying from drivers. However, home stores felt particular pressure in September, with a whopping 9.7% decline in sales of items such as furniture and lighting debunking the notion that people will buy early to avoid potential Christmas shortages. The retail sector finds itself in a curious position, where shortages in materials and products dampen expectations around what should be a particularly strong festive period given elevated savings levels. 

Today looks set to be dominated by PMI data, with European numbers seeing surprising strength across manufacturing. Claims that the sector will suffer over the course of the fourth quarter may perhaps be overblown as governments move to help ease the truck driver shortage in the region. The impact from government steps to relax restrictions on drivers was always going to be questionable, yet better-than-expected manufacturing PMI surveys from the UK, Germany, and eurozone do bring confidence after a period of significant concerns. From a UK perspective, the sharp ramp-up in services sector growth brings confidence in the UK growth story. Coming off the back of three consecutive months of slowing growth in UK services, todays rise helps lift the outlook for Q4 GDP.  

Ahead of the open we expect the Dow Jones to open 14 points higher, at 35,617. 

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