It was another mixed week in markets, dominated by news of China’s second-largest property developer Evergrande’s debt problems. At the same time, global economies are facing a slowing in economic growth with inflation rising sharply.

US: Inflation and interest rates take centre stage

Inflation and interest rate fears weighed markets down last week. Policymakers at the Federal Reserve announced that they could consider tapering financial support for the economy soon and this triggered more worries about how quickly interest rates may rise which in-turn impacted markets. Most indices recorded their biggest weekly drops since February and rounded out the worst monthly declines since the start of the pandemic.

Japan: Stock indices follow the lead of US markets

Japanese stocks followed the lead of US markets, declining during the week. Former foreign minister Fumio Kishida won the Liberal Democratic Party’s presidential election and gives him a nearly certain path to succeed as Japan’s prime minister. He has mentioned the need for additional support for the economy, although he has provided few details. On Friday, Japan dropped its Covid state of emergency for the first time in six months as daily reported cases plunge.

China: Positive news from Evergrande supports investor sentiment

Positive news concerning indebted property developer China Evergrande Group supported investor sentiment. On Wednesday, Evergrande said that one of its units would sell some of its stake in a commercial bank to a state- owned enterprise for 1.5 billion US dollars to help reduce its debt load. Separately, the People’s Bank of China pledged to ensure a “healthy property market” and to protect homebuyers’ rights.

Europe: Fears of lower growth and higher inflation

Shares in Europe fell sharply amid fears that the economy might be sliding into a period of low growth and high inflation. Inflation jumped in August due to higher energy costs and supply chain disruptions. In Germany, the Social Democratic Party won the German general election by small margin and will look to form a majority coalition government which is likely to be a lengthy process. Angela Merkel will stay on as a caretaker chancellor.

UK: Furlough ends and Bank of England talks GDP

The Bank of England said that GDP in the UK would probably not recover to pre-pandemic levels until early next year and that it would keep a “close watch” on inflation expectations and the labour market for signs that temporary price pressures were becoming more persistent. The UK government’s Covid job retention scheme ended, leaving over 1 million workers still on the furlough scheme uncertain over what the future holds.

The Omnis Managed funds, Openwork Graphene Model Portfolios and Omnis Managed Portfolio Service provide you with a diversified asset allocation in line with your Attitude to Risk, investing in Developed Market Equities, such as UK, US, Europe and Asia Pacific as well as Emerging Market equities.  Cautious and Balanced investors will also have significant holdings in UK and Global Bonds, as well as Alternative Strategies.  We believe this multi-asset approach aims to minimise global equity market falls in volatile periods.  Past performance is not a guide to future performance.  The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations.  You may not get back the amount you originally invested.

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