Markets Look to UK October’s MPC Meeting Minutes and the Latest CBI Quarterly Industrial Trends survey

By: Lloyds_TSB

Perhaps unsurprisingly, US government bond and swap markets rallied sharply immediately after yesterday’s weak producer price and housing data. Both sets of numbers are highly relevant to the economic recovery process in the US. A housing market slowdown triggered the current economic and financial crisis and many are looking for the same sector to lead the US into durable economic recovery.

Meanwhile, softer-than-expected producer prices in September (the “core” measure declined by 0.1% m/m) were a reminder that while firms may be tempted to raise prices during a period of financial market optimism, the underlying demand environment may be somewhat weaker. In short, questions remain on whether economic fundamentals are playing any meaningful role in the current stock market rally.

Today’s economic data releases are concentrated mainly in the UK, in the form of October’s MPC meeting minutes and the latest CBI Quarterly Industrial Trends survey. The Bank of England left Bank Rate on hold at 0.5% on 8 October, while the Committee voted to continue with its programme of asset purchases totalling £175bn. The previous set of minutes revealed that those members who had preferred a larger stimulus in August, sided with the majority in September, although the text noted “a larger asset purchase programme could still be justified”.

For us, this broad assessment seems unlikely to have changed. Indeed, we anticipate a further expansion in the Bank’s asset purchase programme at next month’s MPC meeting. Beyond this, today sees a variety of Fed speakers (see calendar below), along with the latest Beige Book of regional economic conditions.

Lloyds TSB Corporate Markets Economic Research

For more information: Emile Abu-Shakra Manager, Media Relations Lloyds TSB Group Media Relations Tel 020 7356 1878 http://www.lloydstsbcorporatemarkets.com/

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