Tuesday brought UK Construction PMI figures. The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index registered 45.9 in July, down fractionally from 46.0 in June and below the 50.0 no-change threshold for the second month running. The latest reading signalled the fastest overall decline in construction output since June 2009. This largely reflected the steepest fall in commercial building for over six-and-a-half years, alongside a drop in civil engineering activity for the first time in 2016. Residential construction also declined at a solid pace in July, but the rate of contraction eased from June’s three-and-a-half year low.

 

Wednesday's session was marked by UK Services PMI figures. The UK service sector registered a fall in business activity in July, according to the latest PMI survey data from IHS Markit and CIPS. Output and new business both declined for the first time in over three-and-a-half years, and at the fastest rates since early-2009. Consequently, employment in the sector was unchanged since June, ending a three-and-a-half-year period of uninterrupted job creation. The 12-month outlook for activity weakened sharply to the lowest since February 2009, linked to uncertainty regarding ‘Brexit’. The Business Activity Index fell to 47.4 in July, from 52.3 in June, signalling a fall in UK services output.

 

Focus of Thursday's session was on BoE's interest rate decision and the following minutes. Mark Carney unveiled an “exceptional” package of stimulus, including the Bank of England’s first interest-rate cut in seven years, as policy makers slashed growth forecasts by the most ever after Britain’s decision to leave the European Union. Officials led by the governor voted unanimously to reduce the benchmark by 25 basis points to a record-low 0.25 percent. They split over other elements of the stimulus, which expands the central bank’s balance sheet by 170 billion pounds ($223 billion) with purchases of gilts and corporate bonds, and a lending program for banks. “We took these steps because the economic outlook has changed markedly,” Carney told reporters in London on Thursday. “Indicators have all fallen sharply, in most cases to levels last seen in the financial crisis, and in some cases to all-time lows.”

 

Carney declared that all of the elements of the stimulus can be intensified, and policy makers said that included taking the rate close to zero if needed. The Monetary Policy Committee’s measures include a plan to buy 60 billion pounds of government bonds over six months, as much as 10 billion pounds of corporate bonds in the next 18 months, and a 100 billion-pound loan program for banks. Should their forecast prove correct, “a majority of members expect to support a further cut in bank rate to its effective lower bound” later this year, they said in a statement.

 

This week markets will be looking at:

 

Industrial Production (Tuesday 10:30)