Introduction: China service sector accelerates, but Delta worries remain
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Data overnight from China showed that the country’s services sector accelerated in July, hitting its highest level since May, although the spread of the Delta coronavirus variant in the country is threatening the recovery.
The Caixin /Markit services Purchasing Managers’ Index (PMI) climbed to 54.9 in July, up from 50.3 the previous month. Any reading over 50 represents monthly growth rather than contraction.
The survey, which tends to focus on smaller firms in China’s coastal regions, contrasted with official data which had showed a slight slow-down in Chinese services data in July.
The services sector in the world’s second-largest economy hasn’t rebounded from the pandemic as quickly as its manufacturing sector, but domestic consumption has been picking up, which has helped.
However a recent rise in coronavirus infections and the spread of the Delta variant remain a dark cloud on the horizon.
This is the view of Michael Hewson, chief market analyst at CMC Markets UK:
Concerns that rising infection rates across Asia, and in China especially, appear to be causing anxiety that the rebound story in that part of the world is about to become the weakest link in the global recovery story. Not only are we hearing about more cases in China, but we are also getting an acceleration of cases across Indonesia and Thailand, as the virus hunts out the parts of the global economy with low vaccination rates.
The spread of the Delta variant in several Chinese cities is already knocking the domestic tourist industry, as local authorities are asking people not to travel to reduce infections.
Will China set the pace for the rest of the world? We’ve got a day of services PMI data coming up – kicking off with the euro zone and the UK later this morning, and followed by the US.
Analysts seem to have fewer concerns about European economies for the time being, thanks to higher vaccination rates across the region.
In Europe – stock markets look set to open positively, after the region-wide Stoxx 600 and London’s FTSE 250 hit record highs yesterday.
- 9am BST: Eurozone services PMI for July
- 9.30am BST: UK services PMI for July
- 12 Noon BST: US weekly mortgage approvals
- 1.15pm BST: ADP survey of US company payrolls
- 3pm BST: US services PMI for July