Morning Report

Morning Report – Tuesday 4th August

Main Headlines

Japanese Foreign Minister Toshimitsu Motegi will visit Britain this week for what he said will be difficult talks with British Trade Minister Liz Truss, with the hope of finding middle ground and concluding a post-Brexit trade deal. “It is indispensable to swiftly form a framework for trade and investment between Japan and Britain that will replace the Japan-EU EPA to ensure the smooth continuation of bilateral businesses,” Motegi told reporters this morning.

European futures rose and stocks in Asia advanced overnight, on track for their biggest gain in two weeks, after a technology fuelled rally in the U.S. amid positive economic data and the potential for further stimulus. Benchmark gauges in Japan, Hong Kong and Australia jumped about 2%, and South Korea gained for a second day. S&P 500 futures were little changed. Earlier, the Nasdaq 100 reached a record as traders sought out companies poised to do best in the current environment.


The pound’s month long rally came to a halt yesterday as the dollar rebounded slightly even as it remained flat versus the euro. UK PMI data was in line with estimates, showing a pickup in demand, orders growing for the first time in five months and optimism rising by the most in two years. Two thirds of British businesses say they are now “fully operational” after the coronavirus lockdown, up from half in June, according to a survey on Sunday. Brexit, the UK’s high COVID-19 death toll, and the risk of negative interest rates are all commonly cited as reasons for the market’s bearishness. Investors are cautious before the Bank of England meeting on Thursday, where analysts expect the policy rate and quantitative easing program to remain unchanged.


Euro zone manufacturing activity expanded modestly last month, its first growth since early 2019. Manufacturers in Germany, Europe’s largest economy, saw an expansion for the first time since December 2018 and in France activity picked up a touch. Germany’s car industry has also seen demand picking up after coronavirus related restrictions were eased and auto industry exports are expected to rise, a survey published by the Ifo economic institute this morning showed.


A rebound in the dollar faltered overnight as political wrangling over a U.S. relief plan and the gloomy economic outlook kept investors shy of the currency. After its worst month in a decade in July the greenback started August on a firm note as some investors trimmed their short positions however, that was short lived. Despite an encouraging slowdown in new virus cases and better than expected manufacturing data, investors are reserving judgment on whether the U.S. economy can really lead the world’s recovery.

Main Economic Data/Central Banks/Government (All Times BST)

10:00 a.m.: Eurozone April Producer Prices
3:00 p.m.: US Factory Orders