Key Takeaways
- Germany's services sector unexpectedly returned to growth in July, with the HCOB Services PMI rising to 50.6, surpassing preliminary estimates and marking a four-month high.
- Conversely, France's services sector experienced a deeper contraction, as its PMI fell to 48.5, indicating a more significant decline than anticipated amidst deteriorating demand and political uncertainty.
- Iron ore prices are nearing a one-week high, driven by robust demand from China and increased market resilience, while silver is projected to climb towards $37.50 on heightened expectations of a September Federal Reserve rate cut.
- Italy's services PMI sustained its growth path at 52.3, though slightly below estimates, primarily supported by domestic demand.
- Japanese telecommunications giant SoftBank (TYO:9984) is reportedly considering increasing mobile charges, contingent on customer acceptance.
The Eurozone's services sector presented a mixed picture in July, with Germany showing a surprising rebound while France's downturn intensified. This divergence highlights varied economic pressures across the bloc.
German Services Sector Rebounds, Boosting Economic Outlook
Germany's services sector demonstrated an unexpected return to expansion in July, with the HCOB final Services Purchasing Managers' Index (PMI) climbing to 50.6. This figure is up from 49.7 in June and exceeded the preliminary estimate of 50.1, marking the first time in four months the index has risen above the 50.0 threshold, which indicates growth. The HCOB Composite PMI, which includes both services and manufacturing, also improved to 50.6 from 50.4, surpassing initial forecasts of 50.3. This modest growth was supported by renewed demand and an uptick in new business inflows for the first time in nearly a year, despite a slowdown in job creation and a continued decrease in backlogs of work. Economists suggest this data paints a picture of an economy slowly but visibly emerging from a prolonged period of weakness, with a modest return to growth expected in the third quarter after a second-quarter contraction.
French Services Sector Faces Deeper Contraction Amid Uncertainty
In contrast, France's services sector experienced a notable acceleration in its contraction during July. The final Services PMI for France dropped to 48.5, a sharper decline than the preliminary reading and previous month's 49.7. The HCOB Composite PMI also fell to 48.6 from 49.6, indicating a broader private-sector downturn. This marks the quickest rate of decline in services output since April, driven by deteriorating demand conditions, low client business activity, and renewed political uncertainty. New business intakes saw their sharpest reduction in three months, with customers delaying decision-making. While input cost inflation remained contained, firms increased their charges marginally due to competitive pressures. The ongoing political tensions and shaky consumer sentiment are contributing to market volatility and dampening risk appetite in French stocks and bonds.
Italian Services Maintain Growth Amid Domestic Support
Italy's services economy continued its growth trajectory in July, with the HCOB Services PMI ticking up slightly to 52.3. While this was marginally below the estimated 52.6, it represents a sustained expansion, albeit at a moderate pace. The HCOB Composite PMI also rose to 51.5, meeting expectations. Growth in the Italian services sector was primarily buoyed by domestic demand, as new export business declined for the twelfth consecutive month, reflecting ongoing fragility in international demand. Despite robust cost pressures, the rate of inflation retreated, allowing firms to raise charges at a stronger pace to protect profit margins.
Commodities Market: Iron Ore and Silver See Upward Momentum
The commodities market is showing signs of strength, particularly in iron ore and silver. Iron ore prices are nearing a one-week high, buoyed by strong demand from China and increased market resilience. Futures prices for iron ore climbed for a third consecutive session, supported by firm near-term demand, falling portside stocks, and healthy steel margins in China. China's steady demand for steel has pushed prices higher, with September contracts for iron ore climbing on both the Dalian and Singapore exchanges. This is further supported by investor optimism regarding Chinese economic policies and efforts to tackle steel overcapacity.
Meanwhile, silver prices are expected to rise near $37.50 per troy ounce. This anticipated increase is largely attributed to the growing probability of a Federal Reserve rate cut in September. Markets are pricing in a high probability (over 90%) of a September rate cut, driven by recent weaker labor market data in the US. Lower interest rates typically reduce the opportunity cost of holding non-yielding assets like silver and gold, thereby boosting their appeal.
SoftBank Considers Mobile Charge Increases in Japan
In corporate news, Japanese telecommunications giant SoftBank (TYO:9984) is reportedly considering increasing its mobile charges. This potential move is contingent on customer acceptance in Japan. While details are scarce, any such increase would impact a significant portion of the Japanese mobile market, given SoftBank's prominent position.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.