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Euro zone business activity bounced back to growth in July as more parts of the economy that were locked down to curtail the spread of the coronavirus reopened and consumers emerged from their homes and businesses reopened. IHS Markit’s flash Composite Purchasing Managers’ Index registered 54.8 in July with most industries returning to growth, a significant jump from June’s final reading of 48.5, its highest since mid-2018. The headline index had been below the 50 mark which separates growth from contraction since March so a return to positive territory will be welcomed by policymakers and governments who have pumped trillions of euros into the economy.
China ordered the US to close its consulate in the southwestern city of Chengdu, after the American government this week forced China to leave its mission in Houston, citing alleged spying. The Chengdu consulate serves as a key US listening post for developments in Tibet, where Communist Party efforts to suppress dissent have long been a focus of tensions between the world’s biggest economies. President Xi Jinping is preparing for a leadership contest in 2022 and a crucial pillar of support has been Xi’s personification of standing “tall and firm” in the world. The Chinese yuan, a barometer of Sino-US tensions, looks set for its worst week in three months. It last was down 0.2% at 7.0214 per dollar.
The latest round of talks between Britain and the European Union over their future relationship ended with both sides saying they are still far from a deal. EU chief negotiator Michel Barnier said that “big differences” remain between the two parties and that a deal is “unlikely” if the UK refuses to back down on its red lines. A similar statement also came from 10 Downing Street. The talks are now on course to run down to the wire, with discussions set to continue into September as officials seek a deal before European leaders meet in mid-October, just weeks before the transition period ends at the end of the year. The British pound fell 0.2% versus the dollar and the euro, to $1.2722 and 91.18 pence respectively.
The Japanese yen rose to a one-month high while the euro’s gains paused after enjoying a winning streak for all of July, rising by 3.3% above $1.16, since the European Union’s passing of a 750 billion-euro recovery fund restored confidence. The US dollar lost some of its appeal as a safe haven, making room for the Japanese yen to rise. Meanwhile, the Nasdaq 100 Index dropped to a two-week low and turned lower for the week, erasing Monday’s rally and the S&P 500 Index slipped from a four-month high, led by losses in technology firms and companies that make non-essential consumer goods.
