A tentative start to the trading day

Equity markets have been inundated with a torrent of positive data this week, so it’s no surprise that we are seeing a timid start to the trading session following record highs on the FTSE 250 and a two-month high on the main benchmark.

The prospect that the US payrolls could be the cherry on top of a very sweet week for the bulls is keeping the downside in check.

UK economic data continues to exceed expectations, and construction output is no exception. For an economic component that was wildly underperforming, the surge to 57 on the purchasing managers index, against the consensus of 51.6, is extremely impressive. It marks a three-year high, and makes the job of the new Bank of England governor something of a cakewalk. The likelihood of additional quantitative easing in the near term is now considered quite remote. Having fallen to a two-week low yesterday, sterling has bounced back by 0.5% against the US dollar this morning.

The UK house market is also flying high, gaining 0.8% in July compared to June, and is 3.9% higher than in July 2012. Nationwide’s chief economist is at pains to deny any evidence of a bubble, but given how elevated house prices are compared to the average salary, we may be looking at a case of the economist protesting too much.

News that Ross McEwan is to take the helm at Royal Bank of Scotland, along with evidence of some successful restructuring which saw the bank swing to a pre-tax profit of £1.3bn from last year’s loss of £1.6bn, was greeted by profit-taking. The share price had soared by over 70% for the year to date, and rose in concert with Lloyds Banking Group yesterday. The shares are now down 3.91%.

Lower metal prices, owing to a stronger dollar, have taken some of the heat out of the mining sector. Fresnillo has lumbered to the bottom of the pile, shedding 4.84%. Up top, International Consolidated Air (IAG) has beaten expectations, showing an operating profit of €245m in the three months to 30 June. The shares have added almost 4%.

Something of a hawk in the Federal Reserve nest, Bank of St. Louis president James Bullard will speak this evening in Boston. Once again markets will look for signals of any near-term monetary policy tightening.

The Dow is down eight points at 15,618.

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