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Euro Zone Business Activity Rebounds in July

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Business activity across the euro zone accelerated to an eight-month high in July, driven by a recovery in the services sector and continued strength in manufacturing. The S&P Global Euro Zone Composite PMI rose to 52.0 from 50.0 in June, moving back into expansion territory for the first time since March, while the Services PMI climbed to a five-month high of 51.7.

The improvement was broad-based, with Germany returning to growth and stronger performances recorded in Italy and Spain. France remained the only major economy still in contraction, although at a slower pace. New orders increased at their fastest rate since November, employment stabilised after six months of declines, and business confidence improved despite ongoing geopolitical uncertainty.

Analysts said the conflict in the Middle East, particularly the Iran war, continues to cloud the economic outlook. While inflation in input and output costs eased, euro zone inflation edged up to 2.9% in July, reinforcing expectations that the European Central Bank could raise interest rates again in September, potentially weighing on consumer spending and business demand.

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German Inflation Rises in Key States Ahead of National Data

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Inflation increased across four major German states in July, according to preliminary figures, signalling that the country’s national inflation rate is also likely to rise. Bavaria, North Rhine-Westphalia, Baden-Wuerttemberg and Lower Saxony all reported higher inflation compared with June, reflecting continued price pressures.

The German government expects inflation to average 2.7% this year and 2.8% in 2027, citing higher energy and raw material costs linked to the conflict involving Iran. Economists surveyed by Reuters also expect Germany’s harmonised national inflation rate to climb to 2.8% in July, up from 2.4% the previous month.

The latest figures come ahead of the euro zone’s inflation data, which is also expected to show a slight increase. The European Central Bank recently kept interest rates unchanged but indicated that further monetary tightening remains possible if inflationary pressures, particularly from rising energy prices, continue.

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ECB Sees Inflation Returning to 2% Within a Year

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The European Central Bank (ECB) expects inflation in the eurozone to return to its 2% target within the next year, according to ECB Chief Economist Philip Lane. Speaking after the central bank kept interest rates unchanged, Lane described the current inflationary pressures as a “medium-sized” shock that requires a measured policy response rather than aggressive action.

Lane said the ECB will continue monitoring inflation closely, particularly the impact of rising energy prices on wages and broader consumer prices. While the central bank has not yet seen significant second-round effects, it warned that prolonged high energy costs could increase the risk of persistent inflation.

Although the ECB did not announce any immediate rate hikes, it signalled that further monetary tightening may be needed if inflation remains elevated. Financial markets are currently expecting at least two additional interest rate increases over the coming months as the ECB works to keep inflation under control.

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ECB Chief Lagarde Says Early Exit Before 2027 Term Cannot Be Ruled Out

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European Central Bank (ECB) President Christine Lagarde has said she cannot completely rule out leaving her position before the end of her term in October 2027 if she decides to play a role in French politics. In an interview with French newspaper Les Échos, Lagarde said it was “possible” she could depart early, adding that she believes a strong European voice should be part of France’s presidential debate.

However, Lagarde dismissed suggestions that she is preparing to run in France’s presidential election next spring. When asked whether she would support a candidate or become one herself, she initially joked that she would “reflect on it” before clarifying that such a move is “not currently on the agenda.” She emphasized that her priority would be to contribute a European perspective to France’s political discussions rather than pursue elected office.

Lagarde reiterated the importance of France remaining firmly anchored within Europe, arguing that the country’s economic future depends heavily on its role within the European Union. She said she would speak with both a French and European voice, stressing that France must play a decisive role in shaping the continent’s economic future while maintaining strong European cooperation.

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Eurozone Factories Stockpile as War Fears Hit Confidence

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Manufacturers across the Eurozone accelerated purchases of raw materials in April, building up inventories amid fears of supply disruptions and rising costs linked to tensions in the Middle East. The S&P Global Eurozone Manufacturing PMI rose to 52.2, indicating growth, as both producers and customers rushed to secure supplies before prices climb further.

Despite the uptick in activity, business confidence weakened significantly. Future output expectations fell to their lowest level in 17 months, reflecting growing uncertainty about the economic outlook. While new orders grew at their fastest pace in four years, economists noted that much of this demand was driven by precautionary buying rather than genuine long-term growth.

Rising input costs and supply chain disruptions added further pressure, with delivery times slowing and inflationary trends intensifying. The European Central Bank has signalled concerns over persistent inflation, raising expectations of upcoming interest rate hikes. Although manufacturing activity expanded across all monitored countries, employment continued to decline, highlighting underlying fragility in the sector.

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Italian Watchdog Clears MPS Board Slates Ahead of Key Shareholder Vote

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Italy’s market regulator Consob has ruled that all three slates of nominees submitted for the board of Monte dei Paschi di Siena (MPS) are fully legitimate, according to a source familiar with the matter. The decision follows a complaint filed by MPS’s current board over a slate presented by small investor PLT Holding, which aims to secure another term for CEO Luigi Lovaglio.

Consob, working closely with the European Central Bank, dismissed the complaint and confirmed that none of the candidate lists violate regulations. The regulator also clarified that its decision is final, aiming to remove uncertainty after MPS previously described its discussions with authorities as preliminary.

The ruling comes ahead of the April 15 shareholder vote to appoint a new board and CEO, with governance advisers preparing voting recommendations. While PLT supports Lovaglio’s continuation, the current MPS board is backing Fabrizio Palermo, CEO of utility company Acea, and a third slate has been submitted by fund manager association Assogestioni.

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Euro Zone Services Growth Picks Up Slightly as Demand Improves

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Services activity across the euro zone expanded at a slightly faster pace in February as demand conditions improved, according to a Purchasing Managers’ Index (PMI) survey compiled by S&P Global. The HCOB euro zone services PMI rose to 51.9 from 51.6 in January, signalling continued growth, though the pace of expansion remained modest. Economists noted that while momentum improved compared with the previous month, overall performance in the sector was still subdued.

New business volumes increased modestly, extending an expansion trend that began in August, while companies continued reducing backlogs of work for a fourth consecutive month. However, hiring growth slowed to a five-month low as business confidence softened. At the same time, cost pressures intensified sharply, with firms reporting rising wages, energy prices and transportation costs pushing input inflation to its highest level in nearly three years.

The data suggests the European Central Bank may remain cautious about cutting interest rates further, as persistent price pressures remain a concern. Among major economies, Germany recorded the strongest services growth, while activity slowed in Italy and Spain, and France’s services sector continued to contract, albeit at a slower pace. The services rebound helped lift the euro zone’s composite PMI to a three-month high, extending the region’s economic expansion to 14 months.

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Nvidia Earnings Take Spotlight as Markets Brace for AI, Geopolitical and Policy Signals

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Nvidia is set to release its quarterly earnings next week, a highly anticipated event as investors assess the strength of artificial intelligence-driven growth and its impact on global markets. The chipmaker, currently the world’s most valuable company, has seen its shares surge since the rise of AI technologies, but momentum has slowed in 2026 amid concerns about returns on massive AI investments. Investors will also monitor results from major software firms like Salesforce and Intuit, as AI disruptions reshape the broader technology sector.

Beyond corporate earnings, geopolitical tensions continue to influence market sentiment, particularly as the fourth anniversary of Russia’s invasion of Ukraine approaches. Ongoing conflict, uncertainty over ceasefire efforts, and rising tensions involving Iran have contributed to volatility in oil prices, defence stocks, and gold. Global investors are increasingly concerned about overlapping geopolitical risks, including conflicts in multiple regions and their potential economic consequences.

At the same time, key economic data and political developments are expected to shape central bank policies and investor outlooks worldwide. Inflation data in Australia and Tokyo will be closely watched for clues on future interest rate hikes, while leadership uncertainty in the European Central Bank and political pressure on UK Prime Minister Keir Starmer could influence bond markets and currencies. Together, corporate earnings, economic indicators, and political events are set to play a decisive role in shaping global financial markets in the coming weeks.

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ECB Should Brace for New Shocks, Including Russian Threats: Simkus

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European Central Bank policymaker and Lithuanian central bank governor Gediminas Simkus said the ECB’s current policy stance is appropriate, with inflation at target and interest rates in a neutral zone, but warned that fresh shocks could disrupt this balance. Speaking to Reuters, Simkus highlighted persistent global uncertainty driven by geopolitical tensions, particularly the risk of Russian military aggression in eastern Europe, alongside trade frictions and other external pressures.

Simkus stressed that the ECB must ensure its systems are resilient to such risks, including safeguarding cash distribution and payment infrastructure in case of heightened security threats. He noted that countries bordering Russia face unique challenges, ranging from cyberattacks to airspace incursions, and argued that central banks must remain operationally prepared. He also added that banks need to be ready for longer-term risks such as climate change.

On monetary policy, Simkus said interest rates are firmly on hold at the ECB’s February meeting, as modest inflation fluctuations around 2% are normal. However, he cautioned against signalling future moves, saying the next rate change could equally be a hike or a cut. Emphasising flexibility, he said the ECB should avoid overreacting to short-term data swings and instead focus on broader economic trends, as shocks tend to affect growth before feeding into inflation.

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ECB Should Avoid Rushing Policy Moves Amid Uncertainty, Says Austria’s Kocher

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The European Central Bank (ECB) should be careful about taking preemptive policy action in response to rising uncertainty, Austrian central bank chief Martin Kocher said in an interview with German outlet Platow. Kocher noted that while geopolitical risks have intensified recently, central banks should avoid committing to policy moves before risks clearly materialise.

Kocher pointed to heightened global uncertainty driven partly by fresh geopolitical tensions, including threats of new U.S. trade measures. However, he cautioned that acting too early—especially when inflation risks are not clearly tilted in one direction—could lock policymakers into a difficult position and complicate communication. “Some risks can be addressed in advance, but many cannot,” he said.

He added that over the past six months, risks had shifted “slightly to the positive,” with modestly improved euro zone growth expectations and stable financial markets. While acknowledging recent developments, Kocher said it was too soon to reassess the broader outlook. Financial markets currently expect the ECB to keep interest rates unchanged through 2026.

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