Disagreement between China and the US remains an influence on both sentiment and markets. After a temporary truce in July, tensions ratcheted up again in August when President Trump announced more tariffs (later delayed till December) which prompted China to halt agriculture purchases (recently restarted) and let the yuan weaken past the seven per dollar level. Whilst a full resolution seems some way off tensions eased in September with delays on tariff implementation and the scheduling of further talks.
Economics – the state of the nations
In the US, the consumer remains resilient and despite the fading boost from tax cuts and a manufacturing sector in recession, the US economy stands in reasonable shape. Europe’s economy is struggling, and data continues to disappoint. Weakness in Germany’s manufacturing sector – particularly among its carmakers and their poor sales is at the core of problem. Brexit continues to weigh on sentiment around the UK, but the economy’s performance remains sluggish rather than tipping into recession. Amidst all the uncertainty the UK consumer is standing strong. Trade tensions and slowing global growth have impacted on emerging market economies but a cut in US rates and low domestic inflation provide support. Whilst we believe the global economy is slowing, we feel fears of a major recession are overdone.