Morning Report

September 5, 2023

“More evidence is coming out of the UK that indicates a slowing economy in response to increasing borrowing costs, with a consumer spending report now accompanying a contracting private sector, amid the highest inflation rates of any major economy.”

Sam Cornford, Partner – Head of Trading


Main Headlines

Hurricane Idalia, which recently impacted Florida’s Big Bend region, is anticipated to result in private market insurance losses ranging from $3 billion to $5 billion, according to Moody’s catastrophe risk modelling division. Idalia initially struck Florida’s Gulf Coast with strong winds, heavy rains, and high surf, before battering southeastern Georgia, where residents faced flooding and being trapped in their homes. These estimates encompass insured losses related to hurricane-induced wind, storm surge, and precipitation-induced flooding.

Consumer spending growth in the UK decelerated last month, signalling a weakening economy. Despite a notable increase in cinema earnings following the releases of “Barbie” and “Oppenheimer”, Barclays data reported on Tuesday reveals that annual growth in consumer spending using credit and debit cards dropped from 4.0% in July to 2.8% in August. The bank attributed this slowdown partly to persistent rainy weather from the previous month. Additionally, the decline is attributed to reduced inflation, particularly a 20% year-on-year decrease in vehicle fuel costs, resulting in minimal growth of 1.0% in spending on essentials like food and fuel, the lowest since April 2020.


Sterling is weaker than most major currencies in the early morning trade. Despite sluggish consumer spending growth overall, sales for retailers belonging to the British Retail Consortium in August are up 4.3% since last year. However, much of this can be explained by inflation in the food sector and growth in total value of sales rather than in volume – there is the potential that this sales growth may fall in the coming months with slowing inflation. On the data calendar today, the UK final services PMI is due to be released this morning and is expected to continue to show a slight contraction in the sector.


The Euro is stronger against Sterling and weaker against the Dollar this morning. Final services PMIs for the Eurozone this morning continued a run of soft economic data that has markets leaning heavily towards a pause at the ECB meeting on September 14. The reading came in at 47.9 compared to a 48.3 preliminary estimate, further weakening the Euro’s economic outlook. July’s PPI index, which measures the change in price of finished goods and services sold by producers, is then likely to have a muted impact on the markets given that Germany and France have already released their figures. ECB President Lagarde declined to give any clues towards the near-future path of interest rates in a speech in London yesterday, instead electing to leave markets in suspense and reiterating previous rhetoric about data-dependence and the determination of the central bank to see the job through.


The Dollar is well bid against most major currencies overnight. Yesterday’s Labour Day was slow for the Dollar as markets were closed, but price action is likely pick up again today as data is released in Europe. Of note today for the US is the factory orders report, which is forecast to switch from three months of growth to a 2.5% fall in the value of new purchase orders placed with manufacturers. The Reserve Bank of Australia’s decision to hold rates still for the fourth consecutive month early this morning was as expected, but resulted in some upside movement in the USD/AUD pair. Meanwhile, the worst Caixin services PMI data for eight months out of China offset some of the positive risk sentiment shift yesterday and strengthened the Dollar slightly.


Stocks fell as disappointing China services data raised concerns about the nation’s fragile economic recovery. The MSCI Asia Pacific Index is on track for its first decline in seven days, driven by Hong Kong shares, which dropped over 1%. Australia’s dollar continued to decline after the central bank decided to keep interest rates unchanged. China’s services sector saw the slowest growth this year in August, an industry survey showed, adding to evidence the economic recovery is losing traction.

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

10:00 a.m.: Euro Area Aug. (F) Services, Composite PMIs
10:00 a.m.: ECB July 1 Year, 3 Year CPI Expectations
10:00 a.m.: UK Aug. New Car Registrations
10:30 a.m.: ECB’s Visco Speaks in Trieste, Italy
11:00 a.m.: Euro Area July PPI
2:30 p.m.: ECB’s Schnabel Chairs Panel

Corporate Events

Earnings include Ashtead, Partners Group, BKW, Sofina


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