FTSE 100 to fall with manufacturing sector in focus

The FTSE 100 is expected to open lower this morning, while traders wait on key updates on the health of the manufacturing sector across Europe.

Between 8.15am and 9.30am a number of major European economies will post their manufacturing PMI reports. Spain, Italy, France, Germany, and the UK will release their reports, and economists are expecting 52.9, 52, 49, 53, and 55.3 respectively.

Any sign of improving sentiment in Britain’s battered manufacturing sector will be welcomed. Many factories initially shut down in the early stages of lockdown, before reopening with social distancing measures in place. However, with huge industries such as aviation struggling to recover from the impact of the pandemic, the knock-on effect on suppliers could be devastating.

Last night Chinese manufacturing data from Caixin showed a reading of 53.1 – the fastest rate of expansion since 2011 and ahead of analysts’ expectations. However, this was in contrast to official figures released on the sector yesterday.

Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, said: “The net result between the two releases suggests that China is firing on nearly all its cylinders.

“Elsewhere, the regional PMI's were a mixed bag and not as positive as I had expected. Thailand, Japan, South Korea all improved, although they are still in contraction territory. Taiwan continued to outperform, while Vietnam and Malaysia went backwards.

“It suggests that the recovery ex-China is still uneven and more than a little fragile. In itself, it will not be enough to derail local currencies and equities, as that it a US Dollar and a search for yield story. One bright note would be that the major economies of Asia continue to show consistent improvement.”

Investors will also be watching for official data from the Bank of England at 9.30am. The central bank will release its report into consumer credit conditions in the UK, as well as giving a mortgage lending reading for July, expected to be around £2.8 billion.

Finally at 10am, eurozone unemployment will be released and it is expected to have increased to 8% from 7.8%.

CMC Markets called the FTSE 100 opening 21 points lower at 5,942 with Germany’s Dax 30 opening 62 points higher at 13,007 and France’s CAC 40 19 points higher at 4,966.

With the London markets shut yesterday for the bank holiday, all eyes were on the US. CMC Markets analyst David Madden said: “The S&P 500 closed a touch lower at 3,500. The NASDAQ 100 set yet another record high, it rallied almost 1%. The Russell 2000, the broader index, fell over 1%. The divergence between the tech-focused index and the small cap benchmark highlights that there are some pockets of negativity in the US market.

“Yesterday was the first day of trading for Apple and Tesla since their respective stock splits took effect. Companies typically pursue a stock split with the intention of making the share price cheaper, even though the market value remains the same. Both stocks traded higher yesterday.”

On the corporate front, a quiet day was expected with interim results from Scottish broadcaster STV, which operates ITV north of the border.