How protests over the death of George Floyd have affected global economy - James Rowbury

And just like that, markets have enjoyed a strong rally throughout the week off the back of positive data from China, where people are now back to work and full steam ahead.

Investors were contented last week to see a continued expansion in the Chinese economy’s manufacturing Purchasing Managers’ Index (PMI) at 50.6 for May.

A reading above 50 signals economic expansion, whereas anything below 50 shows contraction.

This week, further confidence was instilled in light of an expansionary services sector – the Caixin China General Services PMI flashed at 55 in May after crawling back from its February lows of 26.50 in a swift pick-up in domestic consumption.

Nevertheless, China’s key export markets remain shrouded by public health restrictions, giving little in the way of demand – leaving us wondering how large that figure will be when crucial trade routes are reopened.

UK policymakers would be imprudent to use China as a like-for-like translation in our own route to recovery; the economy in China is far more dynamic – its adoption of technology gives credence to this.

Moreover, the Chinese government took a heavy-handed approach to lockdown – face masks were made compulsory while testing, tracing and community surveillance were key to

containing the outbreak – and perhaps it was the right one.

At the time of writing, China’s 1.4bn population is now boasting a meagre 66 active cases and a 94% recovery rate.

The UK has a service-led economy and to see these businesses resume operations and restore confidence gives us a template to work from. The read-through to markets was hopeful,

where over the week leading European indices reacted positively to the news, with the FTSE 100 soaring 2.84% and MSCI Europe up a whopping 3.71%.

European sentiment was given a helping hand by more unprecedented bond-buying programmes, after the European Central Bank (ECB) promised a further €600bn – taking

the total to €1.35tn – in a bid to stimulate an economy heading into deflationary territory.

Loath to label the moves as the controversial quantitative easing (QE), the Pandemic Emergency Purchasing Programme (PEPP) is designed to “bring us closer to the pre-COVID

inflation path”, said President of the ECB, Christine Lagarde.

The news that the scheme will now be extended to June 2021 gives us pause for thought; on the current trajectory the Bank is heading towards a total asset purchase of €1.4tn this year

across its various programmes, taking their total running book of assets to €4tn. These numbers are hard to comprehend, but to imagine them as a third of the Eurozone’s GDP

sheds light on their magnitude.

Unusually, the world’s biggest economy was the market laggard of the week, with the S&P 500 rising a respectable, but gentler, 1.85%.

Throughout the week, civil unrest has ensued, following peaceful protests over the death of George Floyd.

Starting in key US cities but spreading throughout the globe including in London and Manchester, the US protests turned sour.

The technology-heavy market was dragged into the debate as President Trump set in motion plans to regulate social media’s discretion over content. What has been the shining light

throughout the pandemic, the Nasdaq index tumbled 0.8% throughout the week, after Twitter removed a tweet from the President citing a glorification of violence.

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