Paris Olympics boosts eurozone economic growth; UK business activity accelerates – business live

Shares in US biotechnology company Biogen have dropped by over 1%, after the UK’s health regulator ruled out offering its Alzeimer’s drug on the NHS.

The National Institute for Health and Care Excellence (Nice) has ruled that the benefits of Lecanemab are too small to justify the costs of the therapy and close monitoring of patients for signs of “serious side-effects”.

Nice’s ruling came as the Medicines and Healthcare products Regulatory Agency (MHRA), the UK’s drugs regulator, gave the green light to the drug on Thursday.

MHRA’s decision means the UK has become the first country in Europe to license the drug that can treat the neurodegenerative condition rather than its symptoms.

However, the rejection of its use on the NHS by Nice means probably only a small number of patients will benefit in the UK, and will have to access the drug privately.

Biogen’s shares are down 1.3% in early trading at $203.52, a drop of $2.67.

Growth disparities widened further across the US economy last month, according to the latest poll of purchasing managers.

S&P Global’s Flash US PMI Composite Output Index has dipped to a four-month low of 54.1 for August, down from July’s 54.3. That shows the US economy is still expanding, but at a slightly slower pace than last month.

But while the service sector expanded at “a solid and increased rate”, manufacturing output declined at the fastest rate for 14 months.

Service sector companies reported a jump in new business, while orders at US factories declined…

Optimism about output in the year ahead lifted from July’s three-month low, but remained below the survey’s long-run average.

And employment fell in August, dropping for the first time in three months.

Stocks on Wall Street have opened a little higher, as traders continue to anticipate a US interest rate cut next month.

The Dow Jones industrial average has gained 0.3%, or 127 points, to 41,018 points, while the broader S&P 500 index is 0.33% higher.

A gauge of activity across the US economy has weakened – which will add to pressure for an interest rate cut next month.

The Chicago Fed National Activity Index has dipped to –0.34 in July from –0.09 in June, suggesting a decrease in economic growth.

That’s the lowest reading since January, mainly due to a decline in production-related indicators.

Fed’s Collins: rate cut will soon be “appropriate”

US jobless claims rise by 4,000 last week

The ECB monetary policy meeting accounts for July also show that policymakers were happy to leave interest rates on hold last month, and review the situation in September.

They say:

The information available at the Governing Council’s next monetary policy meeting in September would incorporate a wealth of fresh data and the new staff macroeconomic projections for the euro area.

Data for the second quarter would also be available – including GDP growth, compensation per employee, profit margins and productivity – alongside two more HICP releases, as well as monetary indicators and more timely soft indicators for activity and consumer confidence.

The minutes of the last meeting of the European Central Bank’s governing council, in mid-July, have just been published.

They show that ECB policymakers believe the risks to economic growth were tilted to the downside, due to geopolitical risks such as the Russia-Ukraine war, and conflict in the Middle East.

The minutes explains:

A weaker world economy or an escalation in trade tensions between major economies would weigh on euro area growth. Russia’s unjustified war against Ukraine and the tragic conflict in the Middle East were major sources of geopolitical risk. This might result in firms and households becoming less confident about the future and global trade being disrupted.

Growth could also be lower if the effects of monetary policy turned out stronger than expected. Growth could be higher if inflation came down more quickly than expected and rising confidence and real incomes meant that spending increased by more than anticipated, or if the world economy grew more strongly than expected.

The point was made that the continuous presence of macro risks, such as geopolitical fragmentation and a lack of fiscal discipline, might fuel uncertainty and hamper planning, although it appeared that, thus far, the economy had shown resilience to this type of uncertainty.

Migrant cleaners at department store Harrods are celebrating after bosses at the luxury London store scrapped a restrictive new annual leave policy.

United Voices of the World (UVW), the cleaners’ union, has called off a planned strike after Harrods dropped a new policy that restricted staff holidays to between one to two weeks depending on the time of year.

Now, the cleaners will continue to take three weeks of holiday throughout the year, allowing the migrant workers to visit their families

UVW says this is their fourth victory at Harrods, following earlier wins that secured tips and substantial pay raises for waiting and kitchen staff.

This morning’s PMI data from the eurozone is more difficult to interpret than usual as French services activity has been boosted by effects from the Olympics.

So says Bert Colijn, ING’s senior economist for the eurozone, who adds:

The upbeat services sector in France bolsters the entire bloc’s performance. Meanwhile, eurozone manufacturing continues to resemble Germany’s performance at the Olympics: a big disappointment.

The services PMI increased from 51.9 to 53.3, while manufacturing saw the output PMI index well into contraction territory at 45.7 and new orders declining again.

The underlying picture is weak enough for the European Central Bank to seriously consider another rate cut in September, Colijn adds:

When it comes to inflation expectations, the PMI did flag an increase in selling prices reported by businesses, but also a continued drop in input prices was reported. The latter means that pipeline inflation pressures are weakening, which matters for the European Central Bank as it sets policy for the medium term.

Just in: British factory orders fell again this month but at a less severe pace than in July.

That’s according to the latest poll from the CBI; its monthly net balance of new orders rose in August to -22 from -32 in July, marking two years of straight negative readings.

The pound is having a good morning.

It’s gained 0.25% so far, to a new one-year high of $1.3128, against the generally weakening US dollar (see opening post for the reasons why).

The acceleration in UK growth this month may deter the Bank of England from cutting interest rates again as soon as September.

Thomas Pugh, economist at RSM UK, says:

“The August PMIs suggest that the MPC will wait until November before cutting interest rates again. At 53.4 the composite PMI output balance is pointing to growth in line with the MPC’s Q3 forecast.

But the tick up in output prices in the composite and more importantly, in the services sector, combined with further evidence that hiring is starting to grow again means the MPC won’t be in any rush to cut rates again next month.

The money markets this morning suggest there’s a 70% chance that the Bank leaves rates on hold at 5% next month, and only a 30% chance of a cut to 4.75%.

Germany’s economy is struggling to keep up with the UK or France in the growth race.

The latest PMI survey shows that German private sector remains in contraction in August, with business activity falling for the second month running.

Manufacturing production continued falling sharply, while growth in the services sector slowed.

German companies are being hit by a fall in new orders, which means backlogs of work continue falling across both sectors this month.

Overall, the HCOB Flash Germany Composite PMI Output Index has dropped to 48.5 this month, down from July’s 49.1, which is a five-month low, and signals a contraction.