Monday’s Equity Rebound Extended Into Asia and Europe but Has Stalled in the United States – Currency Thoughts
Monday’s Equity Rebound Extended Into Asia and Europe but Has Stalled in the United States
August 5, 2025
Concepts like democracy, rule of law and autocracy get thrown around so much these days that there is a risk that the comparison loses significance. When assessing a developed economy’s future potential, past experience strongly suggests that democracy is the preferable political framework for creating a conducive environment for achieving price stability, faster sustainable economic growth and a healthy middle class. World financial markets this Tuesday are still digesting the startling firing of the chief of the U.S. Bureau of Labor Statistics. Without credible, non-political measurement of economic activity and prices, government economic policy becomes a crap shoot. There’s simply no way to know how to proceed if one doesn’t understand current circumstances and recent trends. Trust in reported economic numbers is essential in the process by which economic participants make plans and take risks. Flying blind is not a good way to run an economy, and the report card of history is clear in vindicating that democracy yields better results than autocracy. The classic example was told by the cold war between the Soviet Union and the United States. As geopolitical competitors in a burgeoning nuclear age, the adversaries were pretty evenly matched, but as a contest between two differently conceived economic and domestic political systems, the contest wasn’t close.
Among all the adaptations by which America has stirred toward a more autocratic playbook, setting the precedent that the head of a data collection agency can be fired simply because the facts aren’t pleasing to the political leader is perhaps the most egregious acceptance of a dark approach to government. To cite one important ramification, it won’t matter who runs the Federal Reserve if nobody trusts reported data. And just to make one clarification, big revisions to economic data have always been normal. As time passes, more information gets measured, and the truth about how an economy evolved gets better understood. That’s why multiple estimates are built into the system of measuring and reporting key statistics like GDP and employment.
In overnight market action, the dollar nudged slightly higher. Equities in the Pacific Rim this Tuesday soared 1.6% in South Korea, 1.5% in New Zealand, 1.2% in Taiwan and Australia, 1.0% in China, 0.7% in Singapore and 0.6% in Japan. Share prices are up but just fractionally in Germany, the U.K. and Spain, but all four major U.S. stock market indices are in the red.
Ten-year sovereign debt yields rose a basis point in the United States but closed down four bps in Japan and have edged a basis point lower in Germany, Italy and Spain. Prices for Bitcoin and oil are down 1.6% and 1.5%, while gold is tad more expensive.
Today’s data menu has been dominated by composite and service sector purchasing manager surveys from July, some of which are revisions to earlier reports when the collected data were not as complete as now.
The revised S&P Global-compiled U.S. composite PMI, for instance, printed at a 7-month high of 55.1, a half-point above its earlier estimate. The service sector PMI, also at a 7-month high, was revised up to 55.7, thus indicating decently paced growth. A separate and more widely followed non-manufacturing business purchasing managers measurement compiled by the Institute of Supply Management paints a gloomier picture. In it, the overall PMI fell to 50.1, suggesting near stagnation. The orders subindex fell a full point to 50.3, and inflation accelerated quite noticeably. Jobs growth became more negatively pronounced, which seemingly corroborates the downward revisions in the Labor Dept report.
The revised Euroland composite and service-sector PMI scores (50.9 and 51.0) were each at 4-month highs and associated with subdued inflation and faster employment. Within the euro bloc, Spain’s 54.7 composite reading topped the leader board, and both Italy and Germany saw higher readings than in June and ones above the 50 neutral level. In France, however, the composite and service sector readings were each at 3-month lows and below 50, signaling a deepening contraction.
Japan’s composite and service PMIs were at 5-month highs of 51.6 and 53.6. China’s composite measure slid to a 2-month low of 50.2 due to soft manufacturing. The Chinese services PMI of 52.6 in July was at a 14-month high. India experienced an unchanged composite PMI of 61.0, associated with an 11-month high service sector index of 60.5.
Australia’s composite and services PMIs got revised upward to a 39-month high of 53.8 and a 16-month high of 54.1, respectively.
Sweden recorded a 2-month low in its composite PMI of 50.3 and a 3-month low in its service sector index of 48.8.
Russia is still operating in full-bore autocratic mode, and its PMI performances show the results of that choice: a 38-month low composite PMI of 47.8 and a 13-month low service sector index of 48.6. Likewise, the Brazilian composite PMI fell to a 51-month low of 46.6 and was associated with a 51-month low service sector PMI of 46.3.
Among other PMI surveys released for July today, the non-oil surveys for Egypt, Saudi Arabia and the UAE (respectively 49.5, 56.3 and 52.9) were at a 2-month high, a 2-month low and a 49-month low. South Africa’s private sector PMI edged up 0.2 points to 50.3. Lebanon’s manufacturing index weakened to a 4-month low of 48.9. Hong Kong’s private PMI improved 1.4 points to a 6-month high of 49.2, while the Singaporean private PMI recovered from June’s 44-month low to a 3-month high of 52.7.
The U.S. goods and services trade deficit shrunk in June to $60.177 billion due to a 3.7% drop in imports, but the first-half deficit totaled $583 billion, 38.3% wider than a year earlier.
Canada, the recipient of one of Trump’s steepest tariffs probably for not agreeing to be America’s 51st state, posted a fifth straight global trade deficit in June, this time totaling C$ 5.861 billion.
South Korean consumer price inflation dipped 0.1 percentage point in July to a 2-month low of 2.1%.
Serbian consumer prices were only 0.2% above year-earlier levels in July, and Filipino CPI inflation dropped half a percentage point to a 69-month low in July.
In July, French industrial production was 0.4% lower than a year earlier, while Spanish industrial production posted on-year growth of 2.3%.
The Central Bank of Armenia’s refinancing rate was left unchanged at 6.75% after today policy review. Since a 25-basis point cut last February, its been at 6.75% and four percentage points below the peak that was maintained from December 2022 until June 2023. Armenian inflation in July of 3.4% was just a bit above the 3.0% target but had been as low as 0.6% last October. “In the context of current macroeconomic developments, financial markets in Armenia generally expect the Central Bank of Armenia to gradually lower the refinancing rate over the next twelve months to approximately 6.25%,” according to a released statement.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Armenia, composite and service PMI readings, reaction to firing of BLS chief, U.S. and Canadian trade balances
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