US services PMI slipped in July

In focus today

 In the euro area, June retail sales will be released. In May, seasonally adjusted retail trade volume declined by 0.7%. Recent 2025 retail sales figures suggest growing consumer caution, with sales remaining flat.

Economic and market news

What happened yesterday

In the US, the ISM services PMI declined to 50.1 for July from 50.8 in June, remaining just above the neutral 50 level. This contrasts with the earlier PMI release, which exceeded expectations. The report highlighted a services employment index of 46.4, signalling contraction for the second consecutive month. While all other sub-indices weakened, the prices index rose, raising concerns for the Fed about the risk of stagflation, as growth and demand soften while prices pressures persist.

In Sweden, the services PMI dropped sharply to 48.8 in July from 54.6 in June, entering contraction territory. The most significant drag came from orders, pointing to weaker demand. This aligns more closely with stagnant hard data, as seen in Q2 GDP growth of just +0.1% q/q following 0% in Q1. It emphasises Riksbank's current challenge of balancing low growth with high inflation.  

Equities: Equity markets drifted sideways yesterday with contrasting signals across regions and sectors. US markets edged lower while both European and Asian indices closed higher. Sector-wise, there was little in the way of a clear narrative, especially in the US. Materials led the pack, while utilities lagged - hardly your textbook "risk-off" setup. Adding to the ambiguity, US small caps outperformed, suggesting underlying risk appetite despite headline index weakness.

In the US yesterday, Dow -0.1%, S&P 500 -0.5%, Nasdaq -0.7% and Russell 2000 +0.6%. Asian equities are mixed this morning, but futures in both Europe and the US point to a firmer open.

FI and FX: The US yield curve flattened from the short end as 2Y yields rose some 5bp while the 10Y US Treasury yield was unchanged. The move was driven by ISM service data showing a stagnating service sector, but rising price pressure which adds to the uncertainty regarding future rate cuts from the Federal Reserve.