UK PMI services surprised to the downside yesterday coming in at 51.1 in August against consensus of 54. Importantly the reading still showed expansion even if the contraction was more than expected. It has also been noted that the UK riots may have been responsible for half of the fall...

Ahead of the Bank Holiday weekend on Monday, markets continue to trade quietly with all eyes watching Fed Chair Bernanke’s speech this afternoon. Although France, Italy, Spain and Belgium reaffirmed their short-selling ban on financial stocks, equity markets are still lower and we doubt that much risk will be placed...

The IFO survey, which measures the views of 7,000 executives in Germany, showed business confidence falling quicker than expected in August. However, after the significant drop in the ZEW survey the day before, the general feeling was that the reading could have been a lot worse.

The Flash European PMI reading for August showed signs of stagnation in the third quarter for the Euro zone. Manufacturing has started to contract, dropping below 50, and business expectations saw a significant drop. This suggests that there could be some down side risk to the initial flash estimate.

2011 Q3 2011 Q4 2012 Q1 2012 Q2 GBP vs Eurozone (EUR) 1.16 1.15 1.15 1.15 US (USD) 1.65 1.66 1.66 1.66 Canada (CAD) 1.57 1.61 1.66 1.66 Switzerland (CHF) 1.28 1.32 1.38 1.38 Sweden (SEK) 10.56 10.35 10.24 10.12 Norway (NOK) 8.82 8.63 8.57 8.51 Japan (JPY) 125...

The relief rally in equities continued yesterday, with Wall Street welcoming a better than expected Chicago Fed National Activity Index. Given that last week’s Philly Fed survey has destroyed confidence, Wall Street managed to close slightly up on the day, ending last week’s rout.

Angela Merkel seems intent on ignoring the markets whilst dealing with the Euro zone debt crisis. Last week, at a meeting between Germany and France both leaders defied the markets idea of a common Euro bond, which led to dramatic drops in the world’s stock markets and Euro weakness.

http://www.bankofengland.co.uk/publications/minutes/mpc/pdf/2011/mpc1108.pdf

The minutes of the Bank of England (BoE) Monetary Policy Comittee (MPC) meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee.

The star performer amongst the western industrialised world, Germany, released GDP figures this morning that showed the economy had ground to a practical standstill in the second quarter, with GDP increasing by 0.1% against expectations of 0.5%.