Economic Update

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China fears dominate markets

Markets opening lower: wary of China and most particularly Evergrande (China’s second largest real estate company) which is struggling to meet its debt funding obligations. This, coupled with very poor retail sales last week and other economic data at the bottom end of expectations is starting to worry markets and world growth.

These fears have given the FEDs decision and likely tapering decision more focus, and in turn have given a fillip to the USD and “safe haven” assets. But the USA economy is not without its worries as COVID cases are not falling and the housing market is lacking confidence.

The week holds several rate decisions: FED, Bank of England and Bank of Japan although the markets appear to be comfortable that it knows the outcome of all three, so any surprises are likely to be met with high volatility.

Elections are also on the horizon for Germany and Canada with the former looking as though a more left-of-centre government will be ushered in and this concern is weighing on the Euro . In Canada the incumbent Liberals are likely to win but the election was brought to bolster their numbers however the electorate seem to have other ideas.

Commodities are mixed; aluminium remains in short supply and thus its price supported but copper has dropped over the week on growth fears and China holiday. Oil held most of its gains buoyed by sharply lower inventories and related retail sales data.

Platinum and palladium both slid on reduced output from the automakers as the continuing chip shortage impacts production.






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Markit Manufacturing PMI



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