Market Update

In the past weeks, much attention has been focused on market reactions to President Donald Trump's proposed tariffs on China, particularly those scheduled for September. However, this week brought a surprising turn with conversations between US and Chinese trade representatives resulting in a delay of the 10% tariff on many key goods until December. The Chinese also eased off on their proposed tariffs on US agriculture. Trump even hinted at a possible meeting or call with Chinese President Xi Jinping before the September trade talks. Though China has yet to confirm its attendance, signs point to these trade talks moving forward.
Amidst these developments, the financial news landscape was dominated by the 'yield curve inversion' in the UK and US bond markets. This phenomenon occurs when bonds with longer maturities yield less. Historically, this inversion has often signaled a recession, but the current economic context is significantly different. While global growth might slow, it's still growth. Economic fundamentals in key regions remain strong, and valuations and corporate profitability are conducive to a positive investment environment. Despite this, investor sentiment has been influenced by short-term concerns, leading to opportunities in risk-off assets like bonds with short maturities. The recent market pullback has left many areas undervalued, offering potential for investors.
This week also saw political moves, notably Jeremy Corbyn's attempt to become UK's 'caretaker' Prime Minister to prevent a no-deal Brexit, which ultimately failed. Additionally, in Italy, political upheaval is a common sight, with the rejection of far-right leader Matteo Salvini's no-confidence vote request in favor of Prime Minister Giuseppe Conte addressing the situation later this month.
In terms of economic data, several noteworthy releases occurred. US inflation, measured by the Consumer Price Index, exceeded expectations at 1.8% year-on-year, a significant win for the US Federal Reserve. UK unemployment was slightly higher than anticipated at 3.9%, but the Office of National Statistics reported an 11-year high in wage growth for the first half of the year. China released industrial production and retail sales data, which were slightly lower than expected due to ongoing trade uncertainties. The Euro Area's second-quarter GDP remained at 0.2% quarter-on-quarter, defying concerns related to trade tensions. Additionally, UK and US retail sales for July surpassed expectations.
While these developments are crucial from an investment perspective, I know some of you might be eager to know the fate of the original 1994 McLaren F1 at the Sotheby's auction. It hasn't been auctioned yet, but it is lot number 261 for anyone interested. Only 106 of these cars were ever made, and just 64 of them were road-legal when they left the factory.