Equity markets were buoyant last week, led by the US which hit yet another new high returning to pre-crisis levels; the only exception was the FTSE All-Share which continues to struggle and remains in negative territory at Friday’s close and year to date.

Inflation data in the US and Europe accelerated in July. In the US, auto and apparel costs pushed data up by 0.6% from the previous month, double economists’ estimates of 0.3% and a 4-month high of 1.6% on an annualised basis. In Europe, the move was not so marked, moving from 0.3% in June to 0.4% in July, driven by non-energy industrial goods and services, food, alcohol and tobacco. This tick up can be attributed to a rebound in demand, from the depths of the pandemic-induced lockdowns earlier this year and suggests that inflation is closer than thought to returning to the pre-crisis pace.

PMI data in Europe for July showed a sharp decline from 54.2 to 51, as tougher pandemic restrictions and the UK’s decision to increase the number of countries which require mandatory quarantine on returning to the UK came into force across Europe. Most indicators remained in expansionary territory, although services were hit particularly hard. In addition to Eurozone data, country-level data for France and Germany was also released and showed a fall from 52.4 to 49 and 57.3 to 51.9, respectively.

Despite bourses trending higher, the recovery appears to be slowing, although hopes for a vaccine have provided periodic support.

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