Eurozone business activity hits eight-month high as services post first increase since start of Iran war
The UK has just had a double dose of good economic news, but growth has also strengthened in the eurozone, where overall business activity reached an eight-month high and services activity a five-month high in July.
S&P Global’s headline composite PMI index - a monthly snapshot of the manufacturing and services sectors – crossed into expansion territory last month, rising from the neutral mark of 50.0 in June to 52.0. This signals growth of business activity for the first time since March.
The services activity index climbed to 51.7, from 49.4 in June, also indicating expansion while there was also an uplift in factory production.
Germany posted its first rise in private sector output since March, while both Italy and Spain saw stronger rates of growth. Spain stood out in particular, recording its best upturn in just over a year-and-a-half. France bucked the trend with its continued, but slower, contraction in activity.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the surveys point to quarterly GDP growth of 0.3%, reflecting a broad-based upturn.
July’s final PMI adds to a picture of encouraging resilience of the eurozone economy amid the ongoing conflict in the Middle East, but also underscores how the business climate is being steered by the changing geopolitical landscape.
July saw the first significant increase in service sector activity since the outbreak of the war, adding to the sunnier summer picture from manufacturing, which has reported the largest increase in production for over four years.
Business optimism also brightened in July, rising to its highest level since January. Sentiment has been lifted by a combination of improving demand conditions, with new orders rising in July at the fastest rate since November, and the slowest growth of firms’ costs since February.
Williamson added:
However, these improvements came on the tailwind of June’s lower oil prices and easing tensions in the Middle East. With the conflict having since flared up again, we are seeing renewed downside risks to growth and upside risks to already-elevated inflation. The latter puts policymakers in more hawkish decision-making stance, though the marked drop in the PMI price gauges potentially provides a window for further rate hikes to be delayed until the outlook for inflation becomes clearer.
SpaceX rocket thought to have crashed into the moon in unintentional collision
In other (bad) news for SpaceX, a four-tonne piece of a discarded SpaceX rocket that has been floating in space since last year is believed to have unintentionally crashed into the moon at high speed, in a collision that poses no danger to Earth but was expected to blast out a new lunar crater.
The object, the size of a building, is part of the SpaceX Falcon 9 rocket that had launched a lunar lander from the US company Firefly Aerospace toward the moon in January 2025.
The rocket body was due to hit the moon about 6.35am BST, crashing into its surface at 5,400mph (8,690 km/h). The impact was predicted to kick up a miles-long plume of lunar dust that, while illuminated by sunlight, would be difficult to spot with the naked eye from Earth.
Professional and amateur astronomers using high-quality telescopes and cameras were not able to immediately confirm the impact on Wednesday, possibly due to the impact site being close to the visible edges of the moon.
Nasa has said the impact was expected to create a crater about 60ft (18 metres) wide and 12ft (four metres) deep and throw dust and rock outward as ejecta.
British new car sales rise 12% driven by EVs
It’s a double dose of good news, as industry data showed new car sales in Britain rose nearly 12% in July, driven by strong demand for electric vehicles.
Britain’s new car market grew 11.7% year on year with 156,571 vehicles registered, according to the Society of Motor Manufacturers and Traders (SMMT).
While the annual comparison was boosted by a relatively weak July last year, the performance marks an eighth consecutive month of growth, as the market continues to recover from the pandemic slump, back towards pre-Covid levels.
Demand grew across all sectors, with private buyer uptake rising 12.6%, fleet deliveries up 9.5% – representing six in 10 registrations – and the lower-volume business segment up 61.3%.
Growth was driven by electric cars, with plug-in hybrids up 33.6% to take a 14.9% share of the market, and hybrids up 11.6% to account for 13.2%.
Battery electric cars (BEVs) achieved another record volume for the month, up 44.5% – compared with a sub-par July 2025 when some buyers delayed switching until confirmation of full model eligibility for the electric car grant – to claim a 27.5% share of the market.
The SMMT now expects BEVs to reach 27.4% of a 2.18m-strong new car market by the end of the year – up from a 26.8% share in its April outlook, but still far short of the 33% mandate target.
Longer term, BEV share is expected to rise to 32.1% in 2027 against a target of 38%. This is despite an ever-expanding number of brands and models, manufacturer subsidies, government incentives and an ongoing backdrop of high fuel prices.
The industry group said while mandate flexibilities are helping bridge some of the gap between natural demand and ambition, they do not come without cost and their value will diminish as targets accelerate. It pointed to significant discounting, marketing and other fiscal support from industry and government – costs which are causing manufacturers to pause or even divert investment, while damaging profitability and costing jobs.
Mike Hawes, the SMMT’s chief executive, said:
July’s record EV performance is a great achievement, reflecting industry’s huge investment in zero emission mobility. But that progress cannot be sustained if manufacturers continue haemorrhaging billions in EV discounts, distorting demand to avoid even steeper penalties. T
The sector’s commitment to decarbonisation is not in doubt but its ability to remain viable – and attract investment for an EV future – is under intense pressure. A sustainable transition will not happen merely by compelling supply when underlying demand is not keeping pace despite year-on-year growth. We need urgent reform of the regulation, else Britain risks undermining its competitiveness and the jobs and livelihoods that depend on this industry.
UK services sector returns to growth as optimism picks up
NEWSFLASH: Britain’s dominant services sector returned to growth last month (good news for the UK’s new prime minister Andy Burnham).
Business activity rose for the first time in three months, there was a small rebound in new orders and inflationary pressures eased.
The headline index from S&P Global, a monthly survey of purchasing managers at companies, climbed to 52.1 in July, from 48.8 in June — rising through the 50 mark that separates growth from contraction. Although the highest since April, the latest reading was still below its long-run average (54.2).
New business at service sector companies rose slightly, ending a four-month run of declines. Export orders declined for a fifth month, but at the slowest pace over this period. There were disruptions linked to the Middle East war, and strong competition. Where growth was reported, firms mostly noted an upturn in sales to European clients.
Backlogs of work continued to fall in July, reflecting a sustained lack of pressure on business capacity. This led to another reduction in employment, although the rate of job losses was the least marked since October 2025.
Input price inflation slowed for the third consecutive month to its lowest since February, helped by reduced fuel bills in July.
Tim Moore, economics director at S&P Global Market Intelligence, said:
UK service providers moved back into growth mode during July as greater consumer spending and strong demand for technology services helped to boost overall business activity.
Optimism has improved in the services sector. Around 45% of companies expect an upturn in business activity over the year ahead, while only 15% forecast a reduction. This signalled the strongest degree of optimism for five months.
Brent crude rises 1%; Guardian analysis shows major oil firms make $93bn profits amid Iran war
Oil prices have reversed the earlier dip and are up on the day.
Brent crude is back above $80 a barrel, rising 1% to $80.2 a barrel.
Eight of the biggest oil companies amassed profits of more than $90bn (£67bn) in just three months as the Iran conflict sent energy prices soaring and the emissions-fuelled climate crisis caused deadly heatwaves.
The windfall war profits have reignited calls for oil and gas supermajors such as Saudi Aramco and BP to pay for the environmental damage caused by “cashing in on human misery” and fund a rapid transition to renewable energy.
Guardian analysis found that the eight listed oil producers made almost $93bn (£69bn) in the three months to the end of June – the first full financial quarter after the US-Israeli war on Iran triggered a surge in global oil prices to highs above $126 a barrel.
Updated
Palantir paid just £2m corporation tax in UK in 2024 despite lucrative public sector contracts
Palantir Technologies shares rocketed 29.5% on Tuesday, its second-best day ever, after the AI company reported “otherworldly” quarterly results, according to its co-founder and chief executive Alex Karp. It forecast worldwide revenues would almost double this year to $8bn (£5.95bn).
“Forget consensus,” Karp told CNBC. “To my knowledge, no businesses at our scale has even grown half this much.”
However, the American software group paid just £2m in corporation tax in the UK in 2024, despite holding public sector contracts worth hundreds of millions, thanks to tax breaks that are likely to reduce its contributions to governments around the world for years to come.
Palantir, which has harnessed AI to secure lucrative work for the NHS and the Ministry of Defence, is growing exponentially.
But the amount of tax Palantir pays compared to profits earned – its effective tax rate – is just 1.4% globally, according to a report published on Wednesday by the Centre for International Corporate Tax Accountability and Research (Cictar).
Updated
John Oh, an energy economist at Commonwealth Bank in Australia, said ship tracking numbers suggest oil flows through the strait of Hormuz have held up better than first thought, reaching an estimated 40% to 45% of pre-war levels last week.
We estimate that traffic flows only need to return to 50% to 60% of pre-war levels to assert oversupply conditions in global oil markets.
This helps explain why Brent oil futures are so quick to move into the $70s as markets are justified to price in oversupply worries when there are hopes that the strait will be officially re-opened.
European shares open higher
European shares have opened higher, joining in the Asian and Wall Street rally.
The UK’s FTSE 100 index climbed 42 points, or 0.4%, in early trading to 10,921.
Germany’s Dax and Italy’s FTSE MiB have both added about 0.6% while France’s CAC edged 0.1% higher and Spain’s Ibex gained 0.5%.
Following an earlier dip, oil prices are up now, but Brent crude remains below $80 a barrel, just. It is trading 0.8% higher at $79.97 a barrel.
Analysts at Deutsche Bank explained the mood of cautious optimism:
Axios reported last night that the US is hoping for a Wednesday announcement of an interim deal that would see a temporary 60-day arrangement between Iran and Oman under which Gulf-bound vessels would pass through Iranian waters, whilst vessels leaving the Gulf would be able to travel through Omani waters with no fees being charged during the 60-day period. Similar details were reported earlier by the Wall Street Journal, though both reports leave unclear whether a long-term arrangement between Iran and Oman might then involve charging a toll for using the Strait.
Markets have seen plenty of false dawns throughout this conflict, so plenty of attention will be on whether a deal is announced imminently and its details. As of now, investors are increasingly pricing a solution…
The rebound in semiconductors continues to gather pace. After enduring a correction of more than -20% during July, investors appear increasingly willing to re-engage with the AI trade.
Helping sentiment were Palantir’s (+29.45%) strong outlook, reports of Anthropic agreeing a $10bn computing infrastructure deal to meet demand for its models, and Caterpillar (+5.60%) raising sales guidance whilst pushing back on concerns that data-centre demand is slowing. Together, that helped rebuild investor confidence in the broader AI capex cycle after July’s turbulence.
The next test for SpaceX shares comes on Thursday, when up to 912m shares held by employees and other pre-IPO stakeholders become eligible for sale.
James Bull, technology industry senior analyst at RSM UK, said:
SpaceX’s first results as a public company are more encouraging than many investors expected. Revenue of $7.8bn was 15% ahead of forecasts and nearly double the same period last year, losses narrowed and the AI division delivered stronger commercial progress than anticipated.
However, the broader investment case remains largely unchanged from the company’s IPO in June. Starlink continues to be the group’s established revenue and profit engine, but the loss-making AI division is where the long-term bet sits. The AI business generated $2.6bn in Q2, but is still running at an operating loss of $1.3bn.
While these results provide evidence of commercial traction, the more important test will be in the next quarter. The business is still investing heavily, with capital expenditure of more than $18bn in the quarter, a significant proportion of which related to AI infrastructure, which requires significant future revenue growth to justify.
SpaceX says that, as recently announced compute agreements with customers including Google and Anthropic go live, the AI division could reach an annualised revenue run rate of $100bn by December, compared with $3.2bn revenue in 2025. The next set of results should provide the first insight of how quickly these agreements are translating into reported revenue.
Updated
For the first time since SpaceX went public, the world got a first-hand look into the trillion-dollar corporation’s financials on Tuesday. The Elon Musk-run business reported its second-quarter earnings, saying that its revenue jumped 92% since June.
SpaceX beat Wall Street expectations, reporting $7.81bn in revenue, versus analysts’ predictions of $6.93bn. While expansive, the company is not profitable. The company reported a loss of $541m, down from a $1bn loss in the same quarter last year.
During a call with investors, Musk called it “another milestone year” for the company. “The SpaceX team is solving some of the hardest engineering problems in the history of humanity,” he said.
SpaceX had a blockbuster initial public offering in June with the largest stock market debut in history. The IPO transformed SpaceX into a $2tn company and briefly crowned Musk the world’s first trillionaire. But since then, the company’s stock has plummeted by 24%, erasing nearly $500bn in market cap.
However, the shares still tanked as investors worried over its high capital spending.
Sam North, market analyst for the trading platform eToro, has looked at the results in detail:
SpaceX has delivered the kind of debut quarter needed to support a $1.75 trillion valuation. Revenue surged 92% to $7.8bn, comfortably ahead of expectations, while adjusted EBITDA of $3.5bn was roughly 70% above forecasts. The most encouraging feature is the breadth of the beat. Connectivity produced $4.29bn, AI contributed $2.56bn and the space business generated $962m. With $100bn of cash and $47.5bn of backlog, SpaceX has the financial firepower to fund ambitions that would overwhelm almost any other company.
But the results do not remove the central risk, they raise the stakes. SpaceX still lost $541m, Starlink’s falling revenue per user shows the cost of chasing global scale, and AI and Starship will continue consuming enormous amounts of capital.
The Nvidia-backed Starmind project makes the orbital-compute vision more credible, but investors still need proof that it can become a profitable business rather than an expensive engineering experiment.
This quarter buys Musk credibility and time, but with the lock-up expiry approaching and the shares already below their IPO level, SpaceX will need to keep producing exceptional numbers to prevent its valuation from returning to Earth.
Updated
Introduction: Asian shares jump on AI trade revival despite SpaceX, AMD setbacks, as oil prices dip
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Technology stocks are booming again after the recent sell-off, boosting global stock markets – despite setbacks for Elon Musk’s SpaceX and the US chipmaker AMD.
In Asia, Japan’s Nikkei rose 3.6% and South Korea’s Kospi jumped 4.1%. Chinese stocks also moved higher, with the CSI index up 1.2%.
Brent crude fell below $80 a barrel by Tuesday’s close, and today oil prices have dipped further amid hopes for a peace deal. Brent, the global benchmark, is down 0.5% at 78.95 a barrel.
Qatar said a draft proposal had been circulated and US treasury secretary Scott Bessent suggested an agreement to reopen shipping flows could be reached “today or tomorrow”. The website Axios reported that the US is hoping for a Wednesday announcement of an interim deal.
Wall Street indices climbed to record highs on Tuesday as Caterpillar and Palantir Technologies joined other companies reporting strong profits, and crude oil prices eased. However, AMD fell 8.8% after hours and SpaceX lost 7.5%, amid worries that capital expenditure is using up its cashflow.
“Oh, the irony,” said Stephen Innes, global strategist at Quintex Intel. “Wall Street is chasing the the AI trade it just sold.”
He explained:
The market has changed its mind on AI, but the risks have not gone away.
The capital expenditure numbers remain staggering. Goldman Sachs calculates that US technology investment as a share of GDP has already surpassed its late-1990s peak, while the largest cloud and computing companies’ 2026 spending plans are almost 50% higher than analysts expected only six months ago.
There is also a circularity that should not be ignored. One hyperscaler’s capex becomes a semiconductor company’s revenue, an electrical-equipment supplier’s backlog and a data-centre developer’s earnings. The infrastructure boom is producing the profits that help validate the infrastructure boom.
That can continue far longer than skeptics expect, particularly when balance sheets remain strong, and demand exceeds available capacity. Eventually, however, investors will need to determine how much of the current earnings growth represents sustainable end demand and how much is the temporary consequence of everyone building simultaneously.
China adds another layer. Rapid advances from Alibaba and other Chinese model developers reinforce the argument that the technological gap is narrowing, but lower-cost models are not an uncomplicated positive for US incumbents. Cheaper inference can broaden adoption while placing pressure on pricing, proprietary-model economics and the value assigned to scarcity.
For now, investors are focused on the bullish side of cheaper AI: wider adoption, heavier compute demand and more infrastructure spending. The pressure on pricing and proprietary-model economics is a problem for another quarter.
Disbelief has given way to an upside chase. July removed leverage, punished weak hands and compressed valuations. Earnings then reminded investors that expensive infrastructure is not necessarily unproductive infrastructure.
Months were spent worrying that Big Tech was spending too much. The new fear is that investors sold just as those companies began proving why they had to spend it.
The Agenda
9am BST: Eurozone S&P Global services and composite PMIs for July
9.30am BST: UK S&P Global services and composite PMIs for July
1.15pm BST: US ADP employment change for July
3pm BST: US ISM services PMI for July
Updated
