Unexpectedly strong US manufacturing boosted Wall Street overnight, lifting the S&P and the Nasdaq to fresh record highs. The momentum is carrying over into Europe as AstraZeneca (AZN) begins its final phase of covid-19 vaccine trials and as UK house prices rise. Downbeat German retail sales having little effect on the Dax. Although the Euro remains under pressure.

German retail sales unexpectedly fell again in July. Sales slipped -0.9% mom in July adding to a -1.6% decline the previous month. The data comes after German and Eurozone inflation also unexpectedly turned negative last month. Recent data is raising questions over the stability of the economic recovery in not only the Eurozone’s largest economy but also across the bloc as a whole. Whilst the Dax is seemingly unfazed, the Euro is coming under pressure, slipping away from the $1.20 target, struggling to keep its head above $1.19. (FXE)

House prices keep on rising
Housebuilders are on the rise following more good news on house prices. Nationwide house price data showed an impressive 2% jump in house prices in August mom, following from a +1.8% gain in July. Expectations had been for a milder 0.5% rise. House prices are benefitting from the stamp duty holiday, low mortgage rates, pent up demand and people reassessing their housing needs after lock down. However, concerns are also growing that this could be a false dawn. Unemployment expected to rise to 7.5% over the coming months as the government withdraws its support from the furlough programme. Fewer people employed will undoubtedly have an impact on the housing market. This will also come as the UK leaves the EU with no trade deal in place (so far) and then in March the Help to buy scheme which has underpinned a strong rise in housebuilders in also set to expire. 

Bailey’s comments key
Looking ahead, Bank of England Governor Andrew Bailey will take the hot seat in front of the Treasury select committee where is will discuss the economic impact of coronavirus. His comments will be key.

ADP in focus
Stateside US ADP employment data will be in focus and could drag on GBP (FXB), which has eased back from an 8-month high. Expectations are for 950,000 new job hires in the private sector versus just 167,000 in the previous month. A strong number will add to optimism surrounding the economic recovery following upbeat US manufacturing sector data. However, any disappointment could not only drag on sentiment but also pull the USD (UDN) to multi year lows.

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