UK Industrial Production (SEP) (9:30 GMT, 4:30 EST)
Actual: 0.2%
Expected: 0.4%
Previous: 0.1%
UK Manufacturing Production (SEP) (9:30 GMT, 4:30 EST)
Actual: 0.0%
Expected: 0.2%
Previous: 0.4%
How Did the Markets React?
Traders could hear a pin drop in the UK markets during the early London session, as fixed income and FX markets maintained thin ranges following last Fridays violent price action amidst US NFPs. Equity markets were a bit livelier, however, price action ignored the UK economic data of the day and instead focused on the mining sector and M&A activity. Industrial production picked up in September, as the figure rose 0.2% from 0.1% the month prior. However, manufacturing production, a large component of industrial production, stagnated after jumping 0.4% in August. Though the headline report improved from last month, the figures were below expectations. A breakdown for the report showed that oil and gas production resumed growth after falling 2.1% last month. In the manufacturing index, a 2.3% jump in chemical production was offset by a 1.9% drop in wood product output. Overall, the data highlights the fragile recovery of the industrial sector in the UK, but still points to expansion.
Bonds UK 10-Year Gilts
UK fixed income markets gapped lower upon opening this morning, but 10-year gilts slowly worked their way higher from the session low of 95.29. Price paused briefly upon the release of UK data and continued to appreciate, which was the correct reaction to weaker than expected industrial sector reports. However, gilts subsequently moved lower and will likely trade quietly for the remainder of the day with no economic data on the calendar out of the UK or US by which to gain directionality.
FX GBP/USD
Cable worked its way lower over the course of the morning and bottomed out at 1.8950 upon release of UK industrial production data, which rose 0.2% from 0.1% the month prior. Meanwhile, manufacturing production, a large component of industrial production, stagnated after jumping 0.4% in August. Though the headline report improved from last month, the figures were below expectations and highlighted the fragile recovery of the industrial sector in the UK, which could be endangered by rising interest rates as the Bank of England is widely expected to tighten monetary policy to 5.00% on Thursday. While price subsequently bounced higher, Cable remains vulnerable for the remainder of the day as there is no UK or US data by which to gain directionality.
Equities UK FTSE 100 Index
The UK benchmark FTSE 100 index gained 0.7% to 6,193.9 over the course of the morning, and while price increases came to a stand-still shortly after the release of UK industrial production, shares resumed their uptrend despite the weaker-than-expected data. Therefore, we can conclude that price action in the London session was centered on strength in the mining sector and renewed M&A activity. With metal prices rising, Vedanta Resources rose 1.8 percent to 14.92 pounds, BHP Billiton firmed 1.8 percent to 10.44 pounds and Kazakhmys gained 1.8 percent to 12.35 pounds. Meanwhile, the gaming sector was at the center of takeover speculation, as the bookmaker Ladbrokes confirmed it was interested in buying troubled online gaming company 888 Holdings. Ladbrokes firmed 0.5 percent to 412 ½p on the news as 888 jumped 7.7 percent to 120p. Furthermore, fellow internet gamer PartyGaming was 4.6 percent higher at 28 ¾ p on hopes it could still get involved.
