Europe Looks To Mixed Start Despite Encouraging Chinese Manufacturing Data

Manufacturing PMI's in focus after Chinese activity jumps by most in a decade

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European bourses look set to open at the start of the new month in a mixed fashion amid rising coronavirus concerns, simmering US – China tensions and ahead of the manufacturing PMI data.

Coronavirus infections are picking up in some US states, the state of Victoria in Australia declared a state of emergency and tightened lockdown restrictions. The UK has also seen localised lockdowns put into place in parts of Manchester, Lancaster and Yorkshire as transmission rates increase.

Concerns that the economic rebound is starting to stall as coronavirus cases rise and restrictions are tightened in some regions is weighing on demand for equities offsetting encouraging Chinese manufacturing data.

China’s recovery gathers momentum
Chinese manufacturing PMI data is bringing some optimism to the table, pointing to the economic recovery gaining momentum. The Caixin /Markit Manufacturing PMI showed that China’s factory activity expanded at the fastest pace in nearly a decade in July as domestic demand continued to improve after the coronavirus crisis. However, employment and export orders remained weak, with export orders falling for a 7th straight month as overseas demand is yet to pick up.

The PMI rose to 52.8 in July, up from June’s 51.2 and well ahead of expectations of 51.3, where the level 50 separates expansion from contraction. The upbeat data adds to mounting evidence that the economic recovery in China is getting back on track faster than expected.

Attention will now turn to manufacturing PMI data from UK, Europe. The data is expected to confirm preliminary readings of 53.6 and 51.1 respectively.

Not just Tik Tok
Rising US – China tensions are posing another threat to sentiment after President Trump hinted to a widening of measures against Chinese owned software which is deemed to pose a threat to national security. So far Tik Tok is in the firing line, however recent comments from the White House suggest an expansion in targets beyond the video sharing app; a move which will continue to stir tensions between the world’s two largest economies. 

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