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Overnight data from China showed the country’s service sector accelerated in July, reaching its highest level since May, although the spread of the Delta coronavirus variant in the country threatens the recovery.
The Caixin / Markit services purchasing managers index (PMI) climbed to 54.9 in July, from 50.3 the previous month. Any reading above 50 represents monthly growth rather than contraction.
The survey, which tends to focus on small businesses in China’s coastal regions, contrasts with official data which showed a slight slowdown in Chinese services data in July.
The services sector of the world’s second-largest economy has not rebounded from the pandemic as quickly as its manufacturing sector, but domestic consumption has picked up, which has helped.
However, a recent increase in coronavirus infections and the spread of the Delta variant remains a dark cloud on the horizon.
This is the view of Michael Hewson, chief market analyst at CMC Markets UK:
Concerns about rising infection rates in Asia, and China in particular, appear to be raising concerns that the rebound in that part of the world is set to become the weakest link in China’s history. the global recovery. Not only are we hearing about more cases in China, but we are also seeing an acceleration of cases in Indonesia and Thailand as the virus hunts parts of the global economy with low vaccination rates.
The spread of the Delta variant in several Chinese cities is already hitting the national tourism industry, as local authorities ask people not to travel to reduce infections.
Will China set the tone for the rest of the world? We have a day of PMI data on services ahead – with the Eurozone and UK kicking off later this morning, and followed by the US.
Analysts appear to be less concerned about European economies at the moment, thanks to higher vaccination rates in the region.
In Europe, equity markets are expected to open positively, after the region-wide Stoxx 600 and London’s FTSE 250 hit record highs yesterday.