German, US manufacturing investor confidence returns

The economic indicators published last week revealed an overall positive scenario on both sides of the Atlantic, with investor confidence in Germany and US manufacturing registering new highs.

In the US, the Empire Manufacturing index, which measures the New York state factory sector, showed growth for the first time since April 2008 when it increased to +12.1% in August from -0.6% in July.

Meanwhile, the jobless claims data was weaker than expected with initial claims rising to 576,000 from a revised 561,000 the previous month, while continuing claims also increased.

On the other side of the pond, the improvement in Eurozone confidence will maintain expectations of recovery in economic conditions. In fact, the German ZEW business sentiment index rose to a level of 56.1 in August, well above its prior level of 39.5 in July, the highest headline reading for over two years.

The Eurozone's inflation dropped by 0.7% in July, more than the 0.6% initially estimated, as energy and food prices declined. Analysts are expecting further downward pressures during summer as energy and food prices are expected to remain low.

In the UK, the week's economic headlines were focused on the Bank of England's minutes, where governor Mervyn King and two other monetary policy committee members wanted to raise Britain's quantitative easing by £75 billion but were outvoted by their six colleagues.

The 6-3 split vote revealed in the minutes has sent shockwaves through the markets which had been expecting a unanimous vote in favour of the £50 billion extension. Nevertheless, all members agreed on keeping interest rates steady at 0.5% and on the need for "substantial" further asset purchases.

Finally, the latest UK consumer inflation data was higher than expected with the annual rate unchanged at 1.8% compared with expectations of a decline to 1.5%.

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