UK gilts tad higher despite higher-than-expected November manufacturing production

The UK gilts traded tad higher during European session Wednesday as investors have largely shrugged-off the higher-than-expected manufacturing production for the month of November

The yield on the benchmark 10-year gilts traded tad higher at 1.28 percent, the super-long 30-year bond yields hovered around 1.82 percent and the yield on the short-term 2-year traded nearly flat at 0.54 percent by 10:30GMT.

Data from the Office for National Statistics showed manufacturing output up 0.4 percent in November, representing the seventh successive robust monthly increase. Factory output is running 3.5 percent higher than a year ago, up 1.5 percent in the latest three months. The wider measure of industrial production, which includes energy, was also up 0.4 percent in November. In the fourth quarter so far, industrial output is running 0.9 percent higher than in the third quarter, with manufacturing output up 1.1 percent, setting the scene for a decent contribution to GDP.

The industry has been buoyed by rising exports, which is, in turn, a reflection of the weak exchange rate and strong growth in key export markets such as the Eurozone, where economic growth has accelerated sharply in recent months. The latest ONS data showed goods export volumes surging by 9.1 percent compared to a year ago in the three months to November. Imports were up a mere 2.6 percent by comparison.

In the construction sector, output rose 0.4 percent in November, but in the latest three months, output was down 2.0 percent compared to the prior three months, the largest decline since 2012. Only private house building showed an increase in the latest three months, up 0.8 percent. The steepest downturn was seen in the private commercial building, which is a key bellwether sector of business investment and which saw output drop some 5.4 percent in the three months to November. On average so far in the fourth quarter so far, construction sector output is down 1.8 percent compared to the third quarter, pointing to a further drag on GDP.

Meanwhile, the FTSE 100 traded 0.30 percent higher at 7,720.00 by 10:35 GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at -46.52 (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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