The British 10-year gilt yield rose to hit its highest level in a month and was last trading at 0.692 percent, having climbed to a high of 0.721 percent earlier in the day.
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That in turn weighed on the blue-chip FTSE 100 equity index, since a weaker sterling typically benefits numerous FTSE’s internationally-focused and export-oriented companies. Data suggested that a fall in global demand contributed to the overall decline in total new orders.
The pound leapt by more than a cent against the dollar to $1.3241 immediately after the data were released.
“In turn, this led to another steep build-up of post-production inventories”, it said.
USA factory data will be published this afternoon to give a broader picture of the state of global manufacturing, although the main focus across the pound remains on tomorrow’s crucial August payrolls report, which could be a key factor in when the Federal Reserve next decides to hike U.S. interest rates.
Markit, which compiled the PMI said, companies had reported restarting work which they had put on hold in July, as their clients saw business starting to return to normal.
However the EEF trade body, which represents manufacturers, said the strength may not be sustained.
Higher consumption in August, along with an expected increase over the next few months, is likely to bolster GDP growth in the next quarter, analysts said.
The FTSE 100 closed down 0.5 percent at 6,745.97 points.
Growth in United Kingdom manufacturing smashed expectations in August, suggesting that the sector has weathered the Brexit storm.
“Business has carried on as normal and the weaker exchange rate is providing support for exporters in a broad range of markets in fairly short order”.
Britain’s manufacturing sector is on a charge, and has rebounded strongly from its initial post-Brexit downturn, according to the latest data released by IHS Markit on Thursday morning.
The Caixin PMI for the service sector and overall business activity for August will be released September 5.
Prime Minister Theresa May said she won’t try to keep Britain in the European Union “by the backdoor”. The flip side of the short-run boost to exports from a weaker currency are signs of rising inflation pressure.
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The report said pre-production inventories “rose at a moderate pace” that was “the quickest in over two years”, as manufacturers sought to secure stock, expecting higher prices for materials like metals, chemicals, textiles, plastic and paper.
