EWU Rises as Bank of England Holds Firm on Interest Rates
The Bank of England’s MPC voted to hold interest rates at 0.5%, which strengthened the pound sterling against the euro and dollar. The EWU rose by 0.89%.
The UK market’s reaction to the ECB’s announcement of its asset-buying plan was reflected in the rise of the iShares MSCI United Kingdom ETF (EWU) on Thursday, September 3.
The UK market experienced a stock rally on Thursday, September 3, over a comment of the ECB Chief Mario Draghi regarding the ECB’s plan to fully implement its asset-buying program.
The iShares MSCI United Kingdom ETF (EWU) returned 3.55% on September 8. Out of its 109 constituent stocks, 102 stocks rose on the day.
Recently, the safe haven currencies like the Swiss franc and the Japanese yen are the ones that are showing a greater correlation to gold.
Though below the forecasts, the decent PMI numbers in August drove the euro-dollar currency pair to a high of 1.133.
China, the manufacturing hub of the world, has been recording sluggish growth. China’s August PMI numbers were at 47.3, below the crucial level of 50.
Among the component sectors of the iShares MSCI United Kingdom ETF (EWU), the financial sector and the consumer staples sector performed well in the UK market on September 2.
The iShares MSCI United Kingdom ETF (EWU) rose by 1.95% on September 2.
With the economic slowdown, a reduction in imports—especially oil—by China has become inevitable, affecting many of its trading partner countries. Consequently, trades of these countries with the UK may be affected.
Although oil prices rose across the US and the UK markets, along with the US oil inventory’s fall—which greatly benefited the energy sector—EWU dipped on August 31.
The euro drove downward against the US dollar as Mario Draghi, president of the European Central Bank (or ECB), hinted at increasing the stimulus program to spark growth in the European economy.
The less dovish tone of the Riksbank meant the Swedish krona gained for the day, especially against the euro. The euro to krona pair (EUR-SEK) fell more than 1% over the day on September 3.
September 4 saw rises in none of the 109 constituent stocks of the EWU. The Fed’s rate-hike indecision impacted UK investors.
The stocks at the bottom of the iShares MSCI United Kingdom ETF (EWU) were Fresnillo (FRES), followed by Standard Chartered (STAN), and Randgold Resources (RRS).
The Chinese slowdown has led to a decline in the import of many goods and services. Further, the devaluation of the yuan has made imports very expensive for the country.
Business activity dropped to a five-month low in the Netherlands in August. The Manaufacturing PMI reading was 53.9 in August, a dip from July’s 56.0 but quite strong considering the neutral level of 50.0.
Italy’s August Manufacturing PMI slipped to 53.8 level in August, down from July’s four-year-high of 55.3. The reading was well supported by an increase in new orders at manufacturers.
The Eurozone Manufacturing PMI report for August met expectations for Eurozone business activity despite heightening global economic uncertainty. The reading for August was 52.3. It was 52.4 in July.
GDP (gross domestic product) growth was expected to rise in Q2 on the back of the monetary stimulus from the ECB to boost economic activity.