From Overseas Press

China slows to cruising speed, Europe perks up

(Agencies)
Updated: 2010-08-05 11:29

PICKING UP THE SLACK

Business and consumer sentiment surveys in Europe have been largely positive over the past month, a trend underpinned on Monday by forecast-beating earnings from two of the continent's heavyweight banks, HSBC and BNP Paribas, which drove its stock markets to a three-month high.

But the outlook for the United States seems less certain, marking a shift in expectations between the two regions that is reflected in recent comments from their top central bankers.

Two weeks ago, European Central Bank President Jean-Claude Trichet urged industrial countries to cut public spending immediately to consolidate the fiscal recovery.

But his US Federal Reserve counterpart, Ben Bernanke, has instead talked of the room for further stimulus to counter any slowdown by pushing borrowing costs lower.

US economic slipped to an annual rate of 2.4 percent in the second quarter from 3.7 percent in the first, official figures showed on Friday, heightening market concerns about growth there and leaving investors betting on China and the rest of Asia to pick up the slack.

The ISM US manufacturing PMI is due from the Institute for Supply Management at 1400 GMT. That index is expected to drop to 54.1 in July from 56.2 in June.

"We are looking for any signs of disappointment in the US data to show that the US economic recovery is stalling. A figure above 50.0 but below forecast would send that signal," a London bond trader said.

Even in fast-growing Asia there are worries the recovery could lose traction if the authorities in Beijing pull on the reins too hard, hitting demand in what has become a top export market for many of China's regional peers.

July car sales in Japan and South Korea also pointed to uncertainty about the global economy. While Japanese sales rose for an 11th straight month, South Korea's Hyundai Motor showed slowing foreign sales.

Major currencies barely budged after the release of the PMI surveys, while an index of Asian stocks outside Japan edged up following the Chinese report.