July’s purchasing manager indices released today show Eurozone firms’ confidence remains near record levels. But UK sentiment slipped as the Delta variant spreads across Britain.
Source: Bank of Singapore, Bloomberg.
The Eurozone’s manufacturing PMI stayed very high at 62.6 while services PMI hit 60.4, both readings well above the key 50.0 level that separates whether firms anticipate activity to expand or contract.
In contrast, the UK’s PMI surveys were weaker-than-expected with manufacturing slipping to 60.4 and services falling to 57.8, signalling UK firms anticipate less robust demand. Thus, the Eurozone’s composite PMI rose to 60.6 in July from 59.6 in June while the UK’s composite PMI slid to 57.7 this month from 62.2 last month as the first chart shows.
Source: Bank of Singapore, Bloomberg.
Today’s PMI data therefore indicates Eurozone firms expect activity to rebound strongly as Europe reopens, to the benefit of risk assets. The second chart shows the Euro Stoxx 50 equity index is trading above 4,000 and is close to 13- year highs reached after the 2008 financial crisis.
Source: Bank of Singapore, Bloomberg.
In contrast, UK firms appear more cautious given the Delta variant and the government’s decision to lift all remaining social restrictions this week. The last chart shows the FTSE 100 index remains below its pre-pandemic levels from early 2020. But if the UK’s high level of vaccinations breaks the link between new infections on the one hand and hospitalizations and fatalities on the other then UK assets will rally strongly again.
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