Some encouraging PMI data emerged from Asia this week. In Japan, services sector activity picked up pace in July, with the Services PMI rising to 53.6 from 51.7 in June, which marks the strongest expansion since February. As a reminder, a reading above 50 signals growth, while anything below indicates contraction. The improvement was largely driven by stronger domestic demand, reflected in a rise in new business orders. However, export orders fell at the sharpest rate in three years, weighed down by a decline in tourist numbers amid renewed earthquake concerns in the region. Economists suggest that business sentiment could improve further, supported by the recent U.S.-Japan trade deal, which is expected to help lift consumption and offer a much-needed boost to Japan’s struggling manufacturing sector.
In China, the Caixin General Services PMI climbed to 52.6 in July 2025, up from June’s nine-month low of 50.6. This marks the sector’s fastest rate of expansion since May 2024. The rebound was driven primarily by a surge in new business (particularly from overseas clients) highlighting a modest recovery in foreign demand. Employment also improved, rising at its quickest pace since July last year after a dip in the previous month.
Meanwhile, global trade developments remain in focus. On Monday, the European Union announced a six-month suspension of its planned retaliatory tariffs against the United States, which had been due to take effect this week. The pause allows time for continued negotiations aimed at finalising a Joint Statement, following an agreement reached on July 27th. Last month, President Trump announced a trade deal with the EU that included 15% tariffs on a broad range of European goods entering the U.S., including automobiles. In exchange, the EU agreed to remove several tariffs on American industrial exports and committed to purchasing $750 billion worth of U.S. energy.
Also on Monday, President Trump signalled that additional tariffs on Indian goods may be on the table, citing India’s ongoing purchases of Russian oil. India, which already faces 25% U.S. tariffs on select imports, responded by reaffirming its commitment to national interests and economic security. Reports indicate India intends to maintain its energy trade relationship with Russia despite potential repercussions.
Looking ahead, investors are turning their attention to the Bank of England’s upcoming policy meeting later this week, where a rate cut from the current 4.25% is widely anticipated. Also on the radar: China’s latest trade balance figures and key U.S. jobs data, both of which could help shape the near-term outlook for global markets.
Nicola Tune, Portfolio Specialist
