Euro Shows No Reaction To Mixed PMIs
Euro strengthens mildly against the US dollar, but it’s upside momentum is limited by weak PMI data. Eurozone PMI manufacturing grew to 55.1 in July, up from 54.9 and exceeded forecast of 54.6. Eurozone PMI services fell to 54.4, down from 55.2 and missed expectation of 55.1. PMI composite dropped to 54.3, down from 54.9 and hit a 2-month low.
German PMI manufacturing rose to 57.3 in July, up from 55.9, above expectation of 55.7. PMI services dropped to 54.4, down from 54.5 and missed expectation of 54.5. PMI composite rose to 55.2, up from 54.8, and hit a 5-month high. France PMI manufacturing rose to 53.1 in July, up from 52.5 but missed expectation of 53.9. PMI services dropped to 55.3, down from 55.9, but beat expectation of 54.3. PMI composite dropped 0.4 to 54.5, hitting a 2-month low.
Europe stocks were generally higher. DAX rose by 1.53%, CAC grew by 0.98% and FTSE up 0.92%. Earlier, China Shanghai Composite jumped 1.61% to 2905.56 as boosted by the government’s stimulus policies.
The Chinese government plans to adopt both fiscal and financial measures to support domestic demand, as the deterioration of trade relations with its major trading partner, has limited the incentive to expand the economy from exports. There will be targeted tax reduction for research and development spending, that could lower around CNY 65B in taxes. Also, monetary policy have to ensure ample liquidity in the markets.