Hot and cold: Euro zone grows but inflation slows
Data in the coming week should confirm the euro zone economy is running hot, after the IMF upgraded growth forecasts and Greece returned to the debt market, although inflation figures could throw cold water on ECB plans to start tightening policy. Growth in the single currency area outstripped paltry expansion in the United States and Britain in the first quarter and the pace did not let up in the April-June period. The euro zone may not be growth champion in the second quarter, after the U.S. rebounded to an annualized 2.6 percent thanks to consumer spending and business equipment investment. But it should again fare better than Britain, whose economy failed to build momentum. A forecast expansion of 0.6 percent in the April-June period, equivalent to an annualized 2.4 percent, would be the third consecutive quarter in which the euro zone has grown at or above a half percentage point, for the first time since 2007-08. “The global economy has been a jumbo jet running on just one engine for the last five, six years, the U.S., but now it seems there’s more from the euro zone as well, with encouraging signs from Asia too,” said James Knightley, chief international economist at ING.
China July factory growth cools but construction boom fortifies economy
Growth in China’s manufacturing sector cooled slightly in July as foreign demand for Chinese goods slackened, but a government-led infrastructure push kept construction humming and helped prop up the world’s second-largest economy. The official Purchasing Managers’ Index (PMI) held above the 50-point mark that separates growth from contraction for the 12th straight month, as China poured funds into a construction boom that has fueled demand for everything from cement to steel and other building materials. But the broad consensus among China watchers is that economic growth will cool in coming months as a government crackdown on financial risks raises borrowing costs for businesses and squeezes profits. The official PMI stood at 51.4 in July, the National Bureau of Statistics said on Monday, down from the previous month’s 51.7 and a touch below the 51.6 forecast in a Reuters poll.
U.S. Stocks Climb With Dollar as Treasuries Slump
U.S. stocks rose toward all-time highs as corporate earnings and deals boosted confidence in the global economy. The dollar gained, paring its worst monthly decline since January. The S&P 500 Index pushed toward a record amid Discovery Communications Inc.’s deal to buy Scripps Networks Interactive Inc. Miners bolstered European shares as copper rose to a two-year high and iron ore surged. HSBC Holdings Plc stoked lenders after reporting earnings that beat estimates. West Texas crude fell back after briefly trading above $50 a barrel for the first time since May. Stocks are rebounding from Friday’s selloff as evidence points to resilient global growth, with investors assessing data from the world’s top three economies. China’s official factory gauge showed continued expansion in June, even as it slipped amid government efforts to curb financial risks. Japan’s industrial output expanded in June, while numbers on Friday showed the U.S. economy accelerating in the second quarter. “Global expansion dynamics are well underway,” analysts at Candriam Investors Group wrote in a report.