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Cable made a bullish start in London on news that AB InBev revised offer to SAB Miller. Early gains were supported by a better-than-expected industrial and manufacturing data in the UK. Cable surged to 1.5309.
While the possibility of a deal keeps the pound upbeat against the US dollar and the euro, the activity on SAB Miller shares remains subdued. The company said InBev bid substantially undervalues the company and investors’ reluctance to buy the rumour could not suffice to support the early rally in pound. At this point, investors are holding their breath before jumping back in the field.
Thankfully the macro data is there to keep the sentiment in pound upbeat. In opposition to last month’s figures, the UK industrial activity expanded by a solid 1.0% in month of August, manufacturing activity picked up by 0.5% over the same month. This being said, the global rout in commodity and energy prices has a significant negative impact on entire sectors’ revenue margins. We already know that manufacturers are looking to adjust their capacity lower in order to adapt to sluggish exports and waning demand. The adjustment in capacity warns of a bumpy path ahead of us. A single data point is obviously not sufficient to assess a better outlook.
The BoE meets tomorrow and is broadly expected to maintain its bank rate at the historical low of 0.50%. Of course, the delay in Fed’s normalisation plans will not be directly mentioned, yet cold winds from China and the slowing signs in economic recovery will certainly keep the MPC members from sailing the open sea.