Political uncertainty dogs business mood across Europe
Today’s top stories
The Biden administration set out its latest plans to curb the modernisation of China’s military with a new regulation restricting US investment in Chinese cutting edge technology.
Octopus Energy is to repay the UK government £3bn in state support it received to take over collapsed supplier Bulb. The 2021 bailout was at one time estimated to be the UK’s most expensive since the financial crisis, at as much as £6bn, although falling energy prices have slashed the final bill.
US banking heir Tim Mellon gave $50mn to a fundraising group supporting Donald Trump a day after the former president was convicted of falsifying business records in a New York hush money trial.
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Good evening.
Today’s batch of “flash” estimates for S&P Global’s monthly survey of business activity highlight striking differences across the Atlantic, with optimism in the US contrasting with uncertainty in Europe.
The purchasing managers’ index (PMI) surveys, while not official data, are closely watched by policymakers as an early gauge of business activity. The US result for June showed output growth hitting a 26-month high and price pressures cooling, giving a composite PMI score of 54.6, where 50 marks the divide between activity shrinking and expanding, up from 54.5 last month.
S&P Global said the upturn was broad-based as rising demand filtered through the economy: “Although led by the service sector, reflecting strong domestic spending, the expansion is being supported by an ongoing recovery in manufacturing, which so far this year is enjoying its best growth spell for two years.” The survey also highlighted how improved business optimism was driving a new appetite to hire.
In Europe, however, the outlook is clouded by nervousness.
UK activity expanded at the slowest pace since November, with the PMI composite score falling from 53 last month to 51.7, reflecting “uncertainty around the business environment in the lead-up to the general election”. The service sector was particularly weak, taking some of the shine off better than expected official retail sales data for May, which suggested British consumers were becoming more confident.
A possible boost could come next month with an interest rate cut: the Bank of England yesterday kept rates on hold at 5.25 per cent but signalled a reduction was on the cards.
Across the Channel, the Eurozone PMI score dropped from 52.2 to 50.8, a three-month low and worse than forecast in a setback for hopes of economic recovery.
New orders at businesses fell for the first time in four months, partly fuelled by political uncertainty in France, where polls suggest Marine Le Pen’s far-right Rassemblement National party could win the country’s snap general election.
Separate official data from Germany, the Eurozone’s biggest economy, showed exports to China falling sharply as trade tensions between the two countries grew. German economy minister Robert Habeck began a three-day visit to China today with hopes of defusing the row between Beijing and Brussels over tariffs on Chinese electric vehicles.
More positively, the PMI survey showed price pressures on Eurozone companies continuing to ease, a sign likely to be welcomed by the European Central Bank, which this month started to cut interest rates ahead of what it hoped were further falls in inflation.
Need to know: UK and Europe economy
A landmark UK legal ruling means the climate impact of burning fossil fuels should be considered when granting permission for drilling sites, making it harder for new projects to go ahead.
Attention is turning to Labour’s plans for the UK economy should it win the July 4 general election. Investors say it could borrow more without causing a Liz Truss-style markets crisis, while FT commentator Chris Giles discusses how Labour could increase spending without raising taxes. Financial advisers tell the FT that wealthy clients are considering moving to more tax-friendly countries.
A Big Read examines how Russia is using nuclear power to win global influence. Despite sanctions on its economy, it continues to be an unrivalled exporter of nuclear power plants and is involved in more than a third of the new reactors being constructed around the world.
Need to know: Global economy
Falling birth rates in rich countries will change the face of societies “and potentially have large effects on economic growth and prosperity”, the OECD said. The average number of children per woman across the 38 most industrialised countries has fallen from 3.3 in 1960 to 1.5 in 2022, a record low.
The FT revealed that the Philippines had secretly reinforced a dilapidated warship marooned in the South China Sea that is central to an increasingly dangerous dispute with Beijing
The FT editorial board criticised US business leaders for pivoting towards Donald Trump as presidential candidate. Tax and regulatory gains may seem appealing to companies, it says, but “uncertainty, economic radicalism and degradation of the rule of law risk undermining the conditions that enabled them to prosper in the first place.”
In the 15 years since the 2008 financial crisis, western governments have poured huge resources into crafting new regulations, monitoring compliance and fostering culture change. But, says columnist Gillian Tett, they often ignore the role that memory and political hegemony play in finance — and what happens when these disappear.
Although banned from standing for president, Venezuelan opposition leader María Corina Machado says only a huge fraud can stop her from defeating incumbent Nicolás Maduro in the July 28 election. Venezuela’s economic crisis has led to nearly a quarter of the population leaving the country.
Already adept at attracting manufacturing investment from companies eager to diversify their supply chains, Vietnam is also having success with its foreign policy of “bamboo diplomacy”, attracting visits from Joe Biden, Xi Jinping and Vladimir Putin.
Need to know: Business
Ethical “white hat” hackers are engaged in a global effort to highlight flaws in powerful AI models from the likes of OpenAI, Google and Elon Musk’s xAI. They have found ways to create dangerous content, spread disinformation, share private data or generate malicious code.
Tate & Lyle said its $1.8bn acquisition of ingredients company CP Kelco would help it produce healthier but tasty products as the backlash grows against ultra-processed foods.
Private equity group KKR agreed to buy Superstruct Entertainment, the company behind more than 80 European music festivals, for £1.3bn in a bet that appetite for live events will grow after the crisis caused by the coronavirus pandemic.
Sales at China’s annual 618 online shopping event fell for the first time, dealing a blow to the country’s influencers, who sell everything from lipstick to toilet paper during live-streamed sales events but now face a plethora of lookalikes.
Science round up
Time is running out to defeat mosquito-borne diseases as the insects become more resistant to traditional prevention methods and climate change opens up new regions where they can thrive. A Big Read explains.
Greenhouse gas emissions from energy hit a record high last year as demand for fossil fuels rose despite a big increase in renewable power, according to a new report.
A $3.2mn-per-patient gene therapy that treats a rare muscle-wasting disease has been granted approval from US regulators to be rolled out to a wider group of patients after previously only being available to young children.
Senior science writer Clive Cookson picks the best science books for the summer, including tomes on the quest for immortality and the search for extraterrestrial life.
Some good news
The Iberian lynx, one of the world’s rarest cats, is no longer endangered, thanks to conservation efforts in Portugal and Spain, including increasing the abundance of its prey, restoring Mediterranean scrub and forest habitat, and reducing deaths caused by human activity.
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