UK retail sales for October published this morning registered a better than expected +0.5% increase month on month compared to expectations of a +0.2% improvement. This breaks a 2 month run of declines and is perhaps more a reflection of consumers starting to buy ahead of the VAT increase next year.


Yesterday in the US the Consumer Price Index showed little sign of any inflationary pressures with the headline rate up +0.2% month on month whilst the core rate which excludes food and energy showed no change over the month. The headline rate was up primarily due to the jump in gasoline prices and increased slightly to +1.2% year on year whilst the core year on year rate fell to just +0.6% from +0.8%. Whilst the more recent increase in commodity prices looks yet to feed through to prices the US is still not far from a deflationary environment.

The US housing market goes from bad to worse. The data for October housing starts yesterday showed an 11.7% decline to 519,000(the consensus was looking for 590,000) on an annualised basis from the previous reported level of 610,000. House builders in the US have very little confidence in a housing market recovery over the coming months and there is very little on the horizon that is likely to change this.

In the US today the weekly initial jobless claims data will make for interesting reading. The trend over the last 2/3 weeks has shown a meaningful improvement and if this is sustained we should at least see the unemployment rate in the US remaining static or possibly even improving. The last reported level for weekly claims was 435,000 after a 24,000 decline and the consensus is looking for a number of around 445,000 this week.

The data set of greatest interest today will be the Philadelphia Fed manufacturing index for November. The prior reading was 1 and the consensus is looking for a around 5 for November (a positive number indicates growth). Earlier in the week the Empire State Manufacturing index for November was published and that plunged to -11.1 when the consensus was expecting a number of around +15. If we see a similar story for Philadelphia this afternoon it will set the alarm bells ringing once again.

US retail sales published yesterday were a little better than expected at +1.2% month on month compared to expectations of a +0.7% increase. However, the majority of the increase was due to a 5% gain in auto sales and after stripping this out the gain was a more modest +0.4%. It was encouraging to see some gains in clothing sales which were up +0.7% whilst spending on building materials increased by +1.9%. It must be borne in mind that the more recent increase in oil and commodity prices is yet to feed through to prices and the consequent increase will undoubtedly reduce the real spending power of US consumers in the months to come providing yet another headwind to GDP growth.


The data announcement that was generally ignored yesterday was the plunge in the Empire State Manufacturing Index to -11.1 for November from the previous reported level of +15.7 for October. New orders fell to –24.38 whilst unfilled orders declined to -24.68. This is the first time this year that this particular index has been in negative territory and it is a worrying development. The equivalent index for Philadelphia is due for publication on Thursday and after registering +1.0 in October the consensus is looking for a reading around +5.0. If this index also turns negative it may well suggest that the recent momentum in manufacturing has been lost and it will once again start to raise fears that the US economy is again losing momentum.

This morning in the UK the CPI for October has been published and once again it has surprised on the upside with the year on year rate increasing to +3.2% against expectation of +3.1%. The more recent Bank of England inflation report stated that they expect inflation to remain above their targeted level of 2% for all of next year. Nevertheless they must be uncomfortable with how stubborn inflation has been during recent months. With a VAT increase due at the start of next year combined with the more recent increase in oil and commodity prices there is a real risk that inflation will continue to get stronger in the short term making it all the more difficult for the Bank of England to bring it anywhere near to its target rate. The Bank of England continues to assert that with so much spare capacity in the economy it will eventually bring inflation down over the medium to long term.

In Europe this morning we have also had CPI data for October with the headline rate edging up slightly to +1.9% year on year which was in line with expectations. The German ZEW Economic Sentiment survey has been published for November and it moved into positive territory at +1.8 compared to the previous reported level of -7.2. A positive number suggests that more investors expect conditions in German to show improvement compared to those that expect it to deteriorate. At a time when the European debt crisis is once again rearing its ugly head this has to be good news but for how long this will last given the developments over the last few days remains very uncertain.

In the US this afternoon the main data due for publication is Industrial Production for November with the consensus looking for a month on month increase of +0.3% compared to the -0.2% reported last month. Also due for publication is the Producer Price Index for October with the consensus looking for a month on month improvement of +0.8% in the headline rate

A brief update today. The main news in the UK yesterday came from the publication of the Bank of England’s inflation report. Within it they did not rule out the possibility of further quantitative easing and given the pressures that are likely on consumer spending next year there has to be a real possibility that further stimulus measures will be needed. In terms of their CPI forecast they now expect the rate to tick up again to around 3.5% by the start of next year and the inflation rate is expected to remain above the 2% target for all of next year. However, over the medium term they still expect inflation to fall below target with the level of spare capacity in the economy providing one of the major downward pressures on prices.


The weekly initial jobless claims number published yesterday in the US provided a pleasant surprise with a drop to 435,000 from the previous reported level of 457,000, and consensus expectations of 450,000. This may well mean that the last Non Farm Payroll figure was not an anomaly and we are now seeing an improvement in the US jobs market. There is a very long way to go but even if unemployment stabilises that will be an improvement on current expectations and it will certainly help consumer sentiment.

Tomorrow in the US the only data of note due for publication is the next reading for the University of Michigan Consumer sentiment index. The November reading is expected to show an improvement on the last report of 67.7. The consensus is looking for a number around the 69 mark but with the improvement in the equity market and a seemingly improving US jobs market there may well be a surprise to the upside.

In the UK tomorrow we get the Nationwide Consumer Confidence index for October and in Europe there will be Q3 GDP data for Germany and the Euro zone. Also in Europe we get Industrial Production data for September.

Please note that the next Daily Comments will be published on Monday 15th November.

There has been little in the way of major economic data to move the market over the last couple of days and after such a strong rally it is not difficult to see why equity markets are struggling to make headway at present. The mining sector was driving the UK market ahead yesterday but even here it is difficult to see sector valuations increasing much more from current valuations despite the strong rise in commodity prices.


The data yesterday was focused on Europe and the UK. In the UK we had further evidence of likely pressure on house prices with the RICS house price survey coming in at the lowest level for 18 months. Also in the UK we had industrial and manufacturing data for September with the former up 0.4% (August +0.4%) month on month whilst the latter increased by a modest +0.1% (August +0.4%). The slowdown in manufacturing growth was broadly as expected and is in line with expectations of a slowdown in GDP growth over the coming months. The only other data published yesterday of note was the German CPI for October that came in line with expectations at +0.1% month on month.

In the UK today the Bank of England Quarterly Inflation Report is due for publication and it will be interesting to see what forecast changes are made to CPI and the GDP outlook especially following the announced government cuts.

In the US the main announcement due today is weekly initial jobless claims. After the better than expected Non Farm Payroll figures last week the market will be looking for further evidence of an improving jobs market. The last weekly jobless claims number rose 20,000 to 457,000 and the market is looking for a modest decline to 450,000 this week. The weekly jobless number needs to fall closer to the 400,000 level if we are to see any meaningful and sustained improvement in the Non Farm Payroll number.

The US jobs report this afternoon was surprisingly strong with the headline number showing a 151,000 gain although the unemployment rate remained at 9.6%. The all important private payroll number was up by 159,000 compared to expectations of between 60,000 and 80,000. The ADP private payroll number on Wednesday which was better than expected was a sign that the Non Farm figure was likely to be better than expectations. The decline in state and local government employment was 8,000, considerably lower than the figure of 83,000 (excluding census workers) reported last month. Employment of temporary workers, which is considered to be an indicator of future employment trends increased by just under 35,000. Overall a very positive report compared to previous months and if this is the start of a trend we may well see the unemployment rate at least remaining steady and potentially starting to tick a little lower. The muted market reaction we are seeing to this report after such a strong rally in equity markets this week is not unexpected. The data we have had this week combined with the announcement concerning QE2 should lend further support to equity markets and the downside risks are certainly reducing at present. The key now is for this trend in employment to continue and the data next month will be crucial.


The US initial weekly jobless claims reported yesterday have once again deteriorated with a move back up to 457,000 compared to the 437,000 reported last week. It will be interesting to see how this number moves over the next few weeks given the Non Farm Payroll data we have had today. If the employment trend is starting to shift for the good we would expect to see the weekly claims number to start moving back towards the 400,000 mark.

Yesterday in the UK the Bank of England MPC meeting took place and as expected there was no change in interest rate policy and more importantly there was no suggestion of further quantitative easing at this stage. In Europe today we have had September factory order data for Germany which declined by 4% month on month compared to expectations of a modest +0.5% improvement and this reverses all of the 3.5% gain made in August. The decline is primarily due to a drop in foreign orders although overall growth year on year remains at a very respectable 14%.

After such a busy week for economic announcements in the US, next week is relatively quiet and we would expect to see the market consolidate its position over the coming days.

The economic data in the US on Monday provided a boost to sentiment with the ISM Manufacturing Index for October exceeding expectations at 56.9 compared to consensus expectations of 54.5. The new orders element increased by the best part of 8 points to 58.9 whilst the production index element increased by 6.2 points to 62.7 and exports rose by 6 points to 60.5. Overall the US manufacturing sector is showing renewed strength which is probably partially related to increased world demand as a result of the weak dollar. Construction spending for September announced on Monday was also better than expected at +0.5% against expectations of a modest dip. The economic calendar in the US was light on announcements yesterday and the market will now be focusing on what today brings with the Non Manufacturing ISM for October as well as the ADP Private Payroll report and the all important Fed meeting result.


The US Non Manufacturing ISM for October is expected to show a modest improvement to 54.0 from the previous reported level of 53.2, according to consensus expectations. The ADP private payroll number is becoming increasingly difficult to forecast given the divergence we have been seeing with the reported private payroll numbers in the Non Farm Payroll data. Last month the ADP number posted a negative figure of -39,000 compared to the private payroll data within the Non Farm Payroll number of +64,000. Estimates for the private payroll number within the Non Farm number due out on Friday are again for around +65,000 and it seems likely that the ADP number will be short of this and probably close to zero growth, but there is considerable scope for error in forecasting this number. Finally, today on the economic front in the US we get factory orders for September with the consensus looking for a gain of 1.8% after the -0.5% decline during the previous month.

For the Fed meeting result we are looking for a number of around the $500bn mark to be committed to asset purchases over the coming 6 months or so, possibly with an indication that more will be done if necessary at the end of this term. A lot of the good news/expectation is now baked into the market and it is therefore very difficult to estimate how the market will react to this announcement. Any disappointment over the announced number will inevitably result in a sell-off.

In Europe on Monday we had the second estimate for the October Manufacturing Purchasing Managers Index which was revised upwards, primarily due to a greater contribution from Germany. Overall we are continuing to see growth within the European manufacturing sector. The equivalent number for services for the Euro zone was published yesterday and again it was a little higher than expectations and remains well within growth territory. In the UK today the October Purchasing Managers Index for Services has been published and it was also slightly ahead of expectations at 53.2. The consensus was looking for a slight dip to 52.2 from the previous reported level of 52.8. Overall Europe still appears to be maintaining the momentum in GDP.

The week ahead is packed full of economic data and key announcements which may prove to be pivotal in how the market moves over the coming weeks. What the Fed announcement contains on Wednesday has been debated for several weeks now and the consensus appears to have settled on around $500bn of asset purchases over the next 6 months or so with the promise of more if it is needed. It seems fair to assume that the Fed committee is aware of what the market wants and expects and this will undoubtedly have some bearing on the decision. What they will undoubtedly want to avoid is an announcement that misses the mark and sends financial markets into reverse.


On Friday of last week the much awaited first estimate for US Q3 GDP was announced and the number was almost bang in line with estimates at 2% annualised. The term ‘growth recession’ seems to be used a lot at the moment to describe the US situation and basically it refers to modest growth that is not sufficient to prevent the level of unemployment from climbing higher. To what extent any new policy measures will improve the situation remains to be seen but it is difficult to see any meaningful improvement on the Q3 level for several quarters to come.

The main event in the UK this week will be the Bank of England MPC meeting on Thursday to decide on interest rate policy and also the possibility of further quantitative easing. The interest rate will almost certainly remain where it is and after the better than expected Q3 GDP data announced last week there is now considerable doubt as to whether the MPC will employ any additional quantitative easing this year.

In the UK today we have had the October Purchasing Managers Index for manufacturing which was better than expectations at 54.9 compared to the consensus forecast of 53.0. There is little doubt that the UK has maintained a reasonable amount of momentum from Q2 but this still looks likely to drop away over the coming months as the new government spending cuts come into being and the housing market decline starts to impact on consumer confidence.

There is a significant amount of US data to get through this week including the all important Non Farm Payrolls on Friday. Today we have the ISM Manufacturing Index for October. The previous reported level was 54.4 and the consensus is looking for a similar number to last month. The new orders element of the last reading did fall back signalling a weaker period ahead although the regional reports do not suggest any material softening in the manufacturing sector.

Also in the US today we get data for construction spending for September. During August construction spending did increase by +0.4% although this was almost entirely down to government spending. This is likely to slow during September and the decline in private sector construction spending is likely to result in a negative number with the consensus looking for a drop of -0.5%.

Finally in the US today personal income and spending data for September will be published. There is no major data due for publication in Europe.

The market has got off to a good start this week with better than expected manufacturing PMI data in China providing an early boost to world markets. With so much critical data ahead over the coming days we can expect a good degree of volatility.

Scottish and Southern Energy is outperforming the market today (£11.10) along with most of the utility sector.  This is one of the attractions of trading within this sector when the market starts to reach levels at which a sell off is due. However, we could easily see some underperformance if the market rallies strongly over the next day or so. Either way we are happy to hold for the time being. SSE has underperformed the market for some time now and whilst the fundamentals are unexciting they should be good enough to prevent the shares from suffering too much if the market does decide to sell off heavily. We will consider cutting the position if the shares drop below £10.95 but as always much depends on what is happening with the broader market. Volatility levels are likely to increase over the coming days ahead of the Fed meeting next week and this may well provide us with an opportunity to achieve a price close to our target.

After a relatively quiet Monday in terms of economic data the week really kicks off today and the first announcement was the preliminary estimate for Q3 GDP in the UK which came in at 0.8%, double expectations of +0.4%. This compares to the Q2 rate of 1.2% and the more modest rate of +0.4% posted during Q1. The decline from the nine year high achieved during Q2 is not unexpected and a similar trend is likely to be seen in the rest of Europe after the initial surge earlier in the year. A more modest rate of growth is likely to continue into Q4 and early 2011. With the prospect of more quantitative easing and with interest rates likely to remain where they are well into 2011 this should help to negate the impact of the government cuts and fiscal squeeze. However, whether it is enough to stave off another period of negative growth remains uncertain.


The main event in the US this week will be the publication of the first estimate for Q3 GDP on Friday. Estimates range between 1.5% and 3% with the number likely to be towards the lower end of that spectrum and probably less than 2%. A strong number may well hit sentiment with so much expectation over the next round of quantitative easing which just about everyone expects to be announced when the Fed meets next week. However, the Fed have already made it clear that further measures are in the pipeline and it is difficult to see any data this week changing that.

Yesterday in the US the only notable data was existing home sales for September which showed a good improvement with a 10% increase to 4.53m on an annualised basis. Even after a 10% jump this number remains at a very depressed level compared to the historical norm, but it does at least suggest some stability is returning to the US housing market. The ongoing investigation into the legality of the foreclosure process in the US is likely to reduce the amount of distressed property coming onto the market in the short term which may in some respects also help to bring some stability.

The main event today in the US is the Conference Board Consumer Confidence Index for October. Most confidence and sentiment indices are oscillating around levels more consistent with recession or no growth but the market seems to accept this and as long as there is no further collapse in confidence this particular data set is unlikely to have much impact on the market. Expectations are for a slight improvement to 50.0 from the previous reported level of 48.5.

In Europe today the GfK consumer confidence index for Germany has been published and this stood at the same level as the previous month at 4.9 compared to expectations of a reading of 5.1.

The market at present is having a weak day with the FTSE100 down 46 points at the time of writing. We still lack any near term catalyst to take the market higher and the downside risks are increasing. The Fed meeting next week holds the key to the short term performance of the market. We remain nervous that if any additional stimulus measures do not meet expectations or perhaps even do not exceed expectations the market may well find reason for a bout of profit taking and perhaps even a short term correction.

We have a very quiet day ahead in terms of economic announcements. Yesterday in the US the data was broadly in line with expectations and we seem to be now stuck in a situation where the US economy is still growing but at a very modest level with little sign of any improvement in the trend. The market seems happy enough to accept this at the moment but for how long is very uncertain. For the market to go higher the additional stimulus measures in the US will have to exceed expectations in our view.


The weekly initial jobless claims in the US announced yesterday were an improvement on the week before at 452,000 but this was tarnished somewhat by the revision to the previous week’s data which was increased to 475,000. The running four week average is now down to 458,000 but with little sign of any real improvement in the trend the outlook for US employment remains poor and it is difficult to see any meaningful improvement for many months to come.

The US Leading Indicator data for September was as expected at +0.3% but the August data was revised down to +0.1% from +0.3%. The Philadelphia Fed Manufacturing Index for October was also in line with expectations at +1.0 but the increase from the -0.7 reported previously is unconvincing. Based on the regional reports there is a good possibility that the ISM number is going to trend lower in the short term.

The German IFO Expectations and Business Climate Index for October have been published this morning and both have shown improvement on the last reported reading against expectations of a modest fall. Having reached a three year high last month most commentators were expecting a decline this month, and the latest readings at least demonstrate that conditions are still comfortably within growth territory.

The Fed’s Beige Book was published yesterday and the overall picture it provided is one of modest recovery but with little in the way of evidence to suggest that any momentum is being gathered. 8 out of the 12 Districts reported some growth with 3 others suggesting a more mixed performance and one stating that conditions “remain slow”. Overall very little to get excited about but the market has taken that as yet another sign that additional stimulus measures will be required.


Today in the US we have three main economic data announcements. The first is the usual initial weekly jobless claims. Last week the claims level rose to 462000, a 13,000 increase on the week. This week the market is looking for an improvement to 455,000. The Leading Indicators (a composite index of 10 lead economic indicators) for September are also due out with the consensus expecting a gain of +0.3%, the same gain as was achieved during August. After the better than expected Empire State Manufacturing Index last Friday the market will be focusing on the Philadelphia Fed Manufacturing Index this afternoon for confirmation that the manufacturing sector is showing signs of once again building some momentum. The Philadelphia Fed reading last month was just into negative territory at -0.7 and the consensus for October is looking for a very modest improvement to +1.0.

Today we have had the October Purchasing Managers Index for manufacturing for Europe and Germany. The former increased to 54.1 from the previous reported level of 53.7 whilst Germany posted a reading of 56.1 against the last reported level of 55.1 and against expectations of a modest drop to 54.6. Manufacturing in Europe appears to be holding its ground at present and is not showing any sign of an imminent slowdown. We also had the equivalent figures for services and in the case of Europe the number did show a modest decline to 53.2 from 54.1 last month whilst Germany once again showed improvement with a move up to 56.6 from the last reported level of 54.9.

In the UK retail sales for September have proved to be disappointing with a month on month decline of -0.2% against expectations of a modest improvement of +0.3%. The August data was revised down to a drop of -0.7%. After the announced cuts in the comprehensive spending review yesterday it is quite likely that consumers will be nervous of the fiscal squeeze that lies ahead and may already be reacting to that. This could well be the start of a prolonged period of subdued consumer spending in the UK.

Today we will hear from George Osborne on the extent of the planned spending cuts and for a change the press will be focusing very much on the UK rather than what is happening in the US. There is no doubt that the severity of the cuts will hold back growth over the coming years but it is widely considered to be a necessary evil to bring the UK deficit back into line. It will be many months before the real impact begins to show although spending habits and intentions will almost certainly start to change immediately once the headlines start to come through. What the UK and most of the developed world face is a prolonged period of sub trend growth with significant uncertainty over the sustainability of recovery and an ongoing risk that the economy loses enough momentum to fall back into periods of negative growth.


A good deal of the recent equity market rally has been founded on a lot of hope and expectation that the US recovery will be kept on track with additional stimulus measures. The same may also be said of the UK with a now increasing likelihood that the Bank of England will soon start a next tranche of quantitative easing. Arguably a good deal of this is now priced in and unless the policy announcements follow the expected path or are indeed greater than expectations, then we have to consider the possibility of a period of range bound trading at best and more likely a period of consolidation.

Yesterday the market was spooked by the unexpected policy action in China after the People’s Bank of China raised the benchmark interest rate(the one year lending and deposit rate was increased by 0.25%). This looks to have been in response to the surge in bank lending during recent weeks. The market was expecting a rate rise but not until next year and this was the reason for the sharp reaction yesterday in equity markets. The overall impact of a modest increase such as this is unlikely to be significant, but it does now raise the question of when the next increase will come.

In the US on Monday the only significant economic announcement was Industrial Production for September which declined by -0.2% against expectations of a +0.2% increase. This is the first decline in Industrial Production this year and looks to be a reflection of the inventory replacement cycle which is slowly coming to an end. Yesterday in the US we had Housing Start data for September which increased to 610,000 on an annualised basis from the 598,000 reported for the previous month. Starts are now 13% above the June low but remain at a very depressed level and the US housing market looks set to remain in the doldrums for many months and possibly years to come.

Today in the UK we have had the publication of the last Bank of England MPC meeting which gives clear indication that we are moving closer to the second round of quantitative easing. In the US today the Fed’s Beige Book will be published which gives a snapshot of current economic conditions in the 12 Federal Reserve Districts.

The economic data published on Friday in the US was generally quite positive. Retail sales for September were a little ahead of the consensus at +0.6% month on month compared to consensus expectations of +0.5%. The previous month was revised upwards to +0.7% compared to the previous estimate of +0.4%. The gains were broadly based as well including the more discretionary areas such as furniture. We also had the Empire State Manufacturing Index for October which showed that general conditions within the New York manufacturing sector actually improved to 15.73 from the previous reported level of 4.14 and against expectations of an increase to 8.0. Whilst only a regional report, this does at least show that the manufacturing sector has not fallen off a cliff as some had feared and if anything growth may again be picking up a little more momentum.


Inflation in the US remains almost nonexistent according to the CPI inflation data published on Friday with the core rate of inflation which excludes food and energy showing no change over the month. The headline rate gained by just +0.1% leaving the year on year rate for headline inflation at +1.1% whilst the core rate is now at just +0.8%.

Ben Bernanke’s speech on Friday received plenty of press attention and with the recent market strength down to expectations of the next round of quantitative easing in the US, the market was looking for any sign as to the size and methods likely to be used. Bernanke didn’t really add any new information apart from reiterating the fact that more action now looks necessary. He did go on to use words that suggest the Fed is likely to utilise a gradual policy response rather than utilise an all out policy response which may well disappoint some market participants. The figure of a $500bn asset purchase programme seems to be the base line for current expectations and a probable starting point for the Fed, with the likelihood that more will follow if the initial response proves to be insufficient. An announcement will almost certainly be made when the Fed next meets on the 2nd/3rd November and up to that time we can expect the speculation and anticipation to keep the market relatively range bound.

The disappointing data on Friday was yet again the University of Michigan Consumer Sentiment number which remain at levels more consistent with no growth/recession. The latest estimate for October came in at 67.9 compared to expectations of 69.0 and the last reported number of 68.2.

In the US today the economic calendar is relatively light with just Industrial Production for September due for announcement. Expectations are for a +0.2% increase. There is no major economic data due out in Europe today.

The UK will be very much in focus on Wednesday with the results of the coalition government’s spending review due for publication. With so much debate as to whether the severity of the cuts will tip the UK economy back into recession there will be plenty of analysis doing the rounds later this week. Some sectors that are more reliant on government spending could well be volatile over the next few days.

A brief note today and with Columbus Day in the US it is relatively quiet on the economic front with world markets ticking modestly higher. The Non Farm Payroll employment report in the US on Friday was poor to say the least. The market reaction was a little baffling and once again it would seem to be hope over the next round of quantitative easing that is saving the day. The headline number for the September Non Farm Payrolls declined by -95,000 compared to consensus expectations of a more modest fall of -8,000. The private payroll number did increase by 64,000 which was enough to keep the market happy. However, one aspect that was surprising was the loss of 83,000 government jobs in addition to the 77,000 Census workers that came off the register. The decline in the number of government workers would have resulted in a negative headline number of -18,000 despite the impact of the Census workers. It will be interesting to see if this is the start of a trend within the public sector given the pressure which State budgets are currently under.


There wasn’t any good news from the US average hourly earnings data either which remained flat month on month. The unemployment rate remained flat at 9.6% but if you look at the broader U6 unemployment rate (includes all unemployed plus those that are working in some form or capacity, for example part time workers that want to be full time and also workers that have become discouraged and given up looking for a job) and this increased to 17.1%, a +0.4% increase on last month.

The economic data in the US more recently has been enough to dampen down double dip fears and this has helped to sustain the recent market rally. Data such as the Non Manufacturing ISM was better than expectations, but without a sustainable improvement in the jobs market it is difficult to see much GDP momentum going into 2011. The debate over when the next round of quantitative easing will come in the US will undoubtedly continue and how effective it will be remains to be seen, but more policy action now seems inevitable and an announcement before the year-end is looking increasingly likely.

There is no major data scheduled for today and we will cover the economic data due out this week in our report tomorrow.

All eyes are on the Non Farm Payroll data due out this afternoon. With the US closed on Monday for a public holiday and little in the US economic calendar until Friday of next week this report is likely to set the tone for trading over the next few trading days. The ADP private payroll number on Friday was disappointing with a decline of -39,000, although the previous month’s figure was revised upwards to a gain of 10,000 compared to the previous reported number of -10,000. Whichever way you cut it these numbers are poor to say the least although more recently the ADP data has not been a particularly good indicator of what the Non Farm Payroll number may contain. The consensus is looking for a modest drop in the headline Non Farm number of -8000 due in part to the remaining census workers falling off the register. The important number will again be the private payrolls with the consensus looking for a gain of around 75,000 although the forecast range is relatively broad at between 0 and 100,000. The market will almost certainly react badly to any negative number.


Yesterday both the Bank of England the European Central banks held their usual interest rate meetings and as expected there was no change in policy. The NIESR estimated yesterday that UK growth during the third quarter has slowed to +0.5%. This morning in the UK we have had Producer Price Input data for September which came in a little ahead of expectations at +0.7% month on month against the consensus which was expecting +0.4%. There is no doubt that inflationary pressures within the UK are remaining stubbornly high and this may well be a constraining factor when it comes to the decision over whether to implement additional quantitative easing.