Markets were quite sedate last week, with global equities as measured by the MSCI ACWI Index falling -0.2% in GBP terms. UK shares were down -0.6%, while Europe Ex-UK was down -1.1% and the S&P 500 in the US bucked the global trend by being up +0.4%. Emerging Market equities were down -1.2%, led by the Asia Pacific Region. Global Investment Grade Bonds in GBP (hedged) fell -0.4%, while High Yield fell -0.2%. Emerging Market Local Currency Bonds continued their strong run this year and are now up 11.6% for the year to date in GBP terms.
The main item to hit the newswires this Monday morning was the release of Chinese GDP data for the second quarter. The reading of 6.2% annualised growth was the lowest such result for the last three decades. Consensus is that these numbers were impacted by the ongoing trade war with the US, while strong domestic consumption averted an even deeper slowdown. This growth figure was in line with Analyst expectations. While it is good news that Chinese growth is less reliant on exports and more reliant on domestic demand, Chinese GDP statistics in the abstract are highly dubious and need to be treated with due scepticism. The numbers are liable to political manipulation, in order to allow the Communist party to meet its target of doubling the size of its economy in 2020 relative to 2010.
Nonetheless, the slowdown in China coupled with wider global growth concerns is impacting the path of global central bank activity. Chairman Powell at the Federal Reserve affirmed the path of easier monetary policy in front of Congress last week. This enhances our view that one should remain invested, but cautiously positioned.