UK gilts gain after July construction PMI disappoints beyond expectations

The United Kingdom’s gilts gained during European trading hours Friday after the country’s construction PMI for the month of July disappointed market sentiments beyond initial anticipations.  

The yield on the benchmark 10-year gilts, traded tad higher 0.618 percent, the 30-year yield hovered around 1.315 percent and the yield on the short-term 2-year traded tad 1 basis point higher at 0.438 percent by 10:10GMT.

At 45.3 in July, the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index posted below the 50.0 no-change value for the fifth time in the past six months. The latest reading was up from June's ten-year low of 43.1 but still signalled a marked downturn in total construction activity.

"Moving into the second half of the year it will take the sector some time to dig its way out of this deep hole. As the autumn and the potential negative impacts of a no-deal exit from the EU threaten, any significant recovery is unlikely to be on the horizon until 2020. Construction optimism is at its lowest since November 2012, so there’s no time to lose in injecting some stability and certainty into the economy and Brexit plans before a recovery of months turns into years," said Tim Moore, Economics Associate Director at IHS Markit.

Meanwhile, the FTSE 100 slumped nearly 2 percent to 7,441.99 by 10:15GMT.