Asian equity markets have continued to pick up speed so far this summer, as manufacturing activity gathers pace. China’s official manufacturing purchasing managers’ index (PMI) rose to 51.7 in July, its strongest since April 2012, beating expectations.

Stimulus measures implemented by China seem to be having an effect, as Chinese equities, measured by the CSI 300 Index, rose more than 8%, while in Hong Kong, the Hang Seng Index was up almost 7%. There were also strong gains for the Korean Kospi Index, while elsewhere there was a sharp July increase in factory activity in India and Taiwan.

Elsewhere, the US economic recovery faltered slightly in July, as job growth slowed and unemployment unexpectedly rose, but overall it remains on track, contributing to a second quarter GDP growth forecast of 4 per cent.

Against this background US equities fell, while spreads between long and short-dated Treasuries have narrowed, indicating a slowdown. The sedate pace of improvement has validated the Federal Reserve’s policy of reducing monetary easing, while holding off on any move to raise interest rates.

UK equities also fell slightly in July, as the FTSE100 lost ground for the second month in a row, although the index was up more than 2% for the second quarter as a whole.

Measures implemented by the European Central Bank in June, designed to boost the eurozone economy, failed to have the desired effect, as equity markets across the region lost ground. Tensions in Ukraine contributed, as several large European multinationals were hit by concerns over Russian investments.

The consequent poor manufacturing and inflation data piled more pressure on the ECB to enhance its easy monetary policy in the near future. The Euro fell against the US Dollar and German Bund yields were also down, as uncertain investors looked for safer havens.