The FTSE 100 has risen by 63 points this morning and in doing so the market has recovered the losses seen so far this week. The pound is also higher and has moved back above the 1.26 handle against the US dollar this morning shortly after a strong reading in the first data point for industry surveys since the turn of the year.
Manufacturing PMI matches lofty expectations
The latest UK manufacturing data has come in broadly inline with expectations and despite showing a drop on the prior reading, this morning’s figure still indicates a healthy pace of expansion in the sector. The PMI print of 55.9 for the month of January is higher than any seen last year barring the December data and remains firmly above the expansion/contraction line of 50. This reading provides further evidence of a robust economy and suggests that despite the self-imposed government deadline for triggering Article 50 becoming ever closer, confidence in the manufacturing industry remains high.
Higher inflation poses headache for BoE
However the reading does show a record increase in input costs, which suggests that UK inflation is set to rise further. The quarterly inflation report and comments from the MPC following the policy meeting will be released tomorrow and they now take on a greater significance as traders look to any signs that the rate-setting body will shift to a more hawkish stance in the face of the recent rise in inflationary pressures. The BoE meeting is widely expected to see no change in monetary policy but any allusions to tightening in the foreseeable future from Governor Carney may lead to more upside in the pound. Having said that, this approach could be deemed as rash given the rocky road ahead and it is more likely that Mr. Carney will adopt a soft stance and reiterate the potential threats to the economy going forward.
BT attempts to pare losses
With a strong rise in the leading UK stock market this morning, the breadth of the rally will reassure bulls as less than ten stocks are currently not joining in the move higher. BT is rising by around 2.5% as the telecommunications company seeks to recover some of the substantial recent losses seen due to accounting irregularities in the Italian unit of its business. Pharmaceutical firms are amongst the best performers on the day with Hikma Pharmaceuticals (LON:HIK), AstraZenca and GlaxoSmithKline all rising. The rise is likely due to comments from US President Trump who yesterday said that his administration will significantly cut the length of time it takes to win regulatory approval for new medicines.