Pessimistic outlook for UK Services sector

Markit Flash UK Services PMI Activity Index fell sharply to 47.4 in July 2016 from 52.3 in June, below market expectations of 48.9, mainly due to the Brexit. It was the first contraction since December 2012 and the steepest fall since March 2009, as output and new orders dropped at the quickest rates in over seven years and employment in the sector fell slightly for the first time since December 2012. In addition, service providers’ optimism about the coming 12 months slumped to a seven-and-a-half year low.

"July saw a dramatic deterioration in the economy, with business activity slumping at the fastest rate since the height of the global financial crisis in early-2009. The downturn, whether manifesting itself in order book cancellations, a lack of new orders or the postponement or halting of projects, was most commonly attributed in one way or another to ‘Brexit’ At this level, the survey is signalling a 0.4% contraction of the economy in the third quarter, though much of course depends on whether we see a further deterioration in August or if July represents a shock-induced nadir. Given the record slump in service sector business expectations, the suggestion is that there is further pain to come in the short-term at least" Chris Williamson, chief economist at Markit, said.

Weekly Closing Wrap

Equity Markets: The pan-European STOXX 600 was down by 0.1 percent while the similar FTS Eurofirst 300 was flat at the close. Banca de Sabadell lost 7.5 percent. The Dow Jones Industrial Average  was up 0.13 percent, at 18,540.52. The S&P 500 was up 0.3 percent, at 2,171.66 and the Nasdaq Composite was up 0.47 percent, at 5,097.85.

Currency Markets: The dollar rose 0.5 percent against its currency basket touching a high of 97.487, its highest since March 10. The euro  was last down 0.45 percent to $1.0975. Sterling was the biggest mover among major currencies. It fell 1.15 percent against the dollar to $1.3080. The dollar added 0.10 percent to 105.97 yen. The Australian dollar was down 0.52 percent at $0.7453 and New Zealand dollar was down 0.13 percent to $0.6987.

Commodities Markets: Brent was down 1.8 percent, at $45.37 a barrel.mU.S. West Texas Intermediate crude fell 1.8 percent, to $43.93. Both benchmarks were on track to a weekly loss of more than 4 percent.  Spot gold shed 0.5 percent to stand at $1,324.66 an ounce. Palladium lost 0.7 percent to $677.75, having touched its highest since late October 2015 on Thursday. Silver, which hit a near two-week low on Thursday, was down 0.6 percent to $19.63 an ounce, while platinum lost 0.3 percent to $1,095.00.

Treasuries: Benchmark U.S. 10-year Treasury notes were down 4/32 in price for a yield of 1.578 percent, up from 1.565 percent the previous session. U.S. 30-year bond prices fell 2/32 in price to yield 2.304 percent, up from 2.301 percent late on Thursday. U.S. two-year notes were down 1/32, yielding 0.714 percent, up from 0.69 percent late on Thursday.