UK gilts lose after July manufacturing production adds hopes to investor sentiments

The UK gilts lost Friday as investors moved away from safe-have assets, post the rise in the country’s manufacturing production for the month of July, adding to hopes that rising goods production will act as a prop to the economy and help counter slower consumer spending in the second half of the year.

The yield on the benchmark 10-year gilts, rose nearly 1 basis point to 0.97 percent, the super-long 30-year bond yields also climbed nearly 1 basis point to 1.64 percent and the yield on the short-term 2-year traded 1-1/2 basis points higher at 0.16 percent by 10:30 GMT.

According to data released by the Office for National Statistics, the UK’s manufacturing output rose 0.5 percent in July, its biggest monthly gain since December. The data bring welcome news after the 0.3 percent drop in production recorded in the second quarter and brings the official data more into line with recent upbeat business surveys.

There was disappointing news on construction, however, where output fell 0.9 percent, below all economists’ forecasts polled by Reuters. Export data also disappointed somewhat. Although rising 1.2 percent in the three months to July, the increase in overseas goods sales in the latest three months was the weakest since October of last year

"Further manufacturing growth is expected in August, given the solid survey data, but the manufacturing upturn needs to be looked at in the wider context of sluggish exports, declining construction activity and consumers being squeezed by low wages and rising prices," said Chris Williamson, Chief Business Economist, IHS Markit.

Meanwhile, the FTSE 100 traded 0.26 percent lower at 7,378.75 by 10:15 GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at 23.04 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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