Morning Briefing PMI deluge before BoE

• Markets have largely started the (BoE) week on the front foot, despite the set piece readings from a raft of Chinese purchasing managers indices, which were the week’s first major watch point, slipping into contraction territory below 50 for the first time since March. China’s main stock market closed about 0.9% lower as a result. The official manufacturing PMI ticked down to 49.9 after reading 50 in June. This was offset to a degree by the services sector index rising to 53.9 from 53.7. It was also helpful that a separate manufacturing index independently compiled by data provider Markit actually rose in July to 50 from 46 in June, the first time this gauge has signalled growth in China’s factory complex since June 2015. There were some notable negative details in that the official data showed a continued rise in unemployment during the month and average input costs failed to come down.
  However promising hints from a Japanese PMI also out in the early hours, helped keep the mood positive at the start. The index stayed in contraction territory below 50 but rose from 48.1 to 49.3.
  And so, we have kicked off what will be something of a PMI Week.
• We already had Eurozone factory PMI this morning and it was worse than expected.
• A UK CIPS (Chartered Institute of Procurement & Supply) factory PMI confirms the one-off survey released just over a week ago,  falling to 48.1 to 49.
• Official and unofficial (ISM) US factory PMIs are still to come on Monday; watch the employment components ahead of this week’s non-farm payrolls (180,000 is the forecast for NFPs). 
• The UK construction PMI on Tuesday will be very closely watched as it was one of the few sectors to slide sharply even before the referendum. Another China services PMI is due on Wednesday; a Japanese composite one also; a Eurozone composite and a UK CIPS services gauge will also be out, as will a US service sector one on that day too. The above are just some of the most important, not all

• Another reason for global markets’ sang froid at the start of the week, despite a potentially disruptive Bank of England (BoE) decision on Thursday (at which consensus expects a 25 basis point cut but no stimulus, for now) was Friday’s weaker than expected US Q2 GDP reading at 1.2%, slightly less than half the 2.6% outcome expected by the most optimistic surveys. This has weakened the dollar, hence enabling a degree of risk seeking to take hold on Monday, particularly whilst profit taking emerged in yen trading. The reading also implies a longer gap before the next Fed hike.
•  The yen will continue to look ominous for Japanese exporters and speculative bears whilst sitting on that 102 handle to the dollar; last at 102.28, losing Japan’s currency some 22 sen.
• The Bank of Japan‘s continued unwillingness to go even deeper into negative rates territory and bigger on asset buying plus the lack of clarity about the true shape of the government’s long-trailed but unimplemented fiscal programme will favour further ratchets higher in the yen crosses and against the dollar so long as that unresolved tension continues.

The state of major global markets at online time: