CROSS ASSET: Pullback In Front End Of Gilt Curve Supports GBP

• MNI: GERMANY OCT FINAL MANUF PMI 49.6 (49.6 FLASH, 49.5 SEP)

SFIZ5 96.35/96.50cs vs 0NZ5 96.70/96.90cs, bought the mid for 4.25 in 10k.

Although 0.6 points stronger than consensus in October, the Italian manufacturing PMI remains below August’s levels. Given the print was essentially neutral, it’s not surprising to see mixed details. An uptick in production was offset by declines in new orders and employment. Underlying demand still appears subdued.

• MNI: ITALY OCT MANUF PMI 49.9 (49.3 FCAST, 49.0 SEP)

Key notes from the release:

• “Demand conditions across the Italian manufacturing sector remained subdued in October. New orders – both overall and from export markets– decreased, albeit with the former only falling fractionally. Panellists attributed weakness to macroeconomic uncertainty and less interest from clients in France and Germany in particular”
• “Despite reduced inflows of new work, output volumes rose slightly at the start of the final quarter. Increased production reportedly stemmed from new customer intakes and, in some instances, higher sales”
• “Despite reduced demand for inputs, cost pressures increased as the price of raw materials and shipping fees had gone up”…“ Companies decided to reduce their charges nevertheless, reflective of attempts to spur demand and due to price competition”
• “On the jobs front, although net employment was down, the rate of reduction was only slight”.
• “When asked about the coming 12 months, Italian manufacturers were optimistic that output levels would rise”