- Equities in London enjoy a solid start to the week
- Despite output figures for the UK economy pointing to recession
- Evergrande's wobbling property empire cast shadow over Asia markets
A solid end to last week in New York, with the S&P500 up by 1.5 per cent and the Nasdaq more than 2 per cent higher on Friday, has carried over onto European markets today with London shares up more than 1 per cent across the FTSE100, FTSE250 and All Share indices while European bourses were also up strongly despite some rather dispiriting economic data around the continent.
UK economy continues to stall
Latest output figures on the UK economy suggest that we could slip into a technical recession between now and March. Data from the Office for National Statistics show shows monthly GDP grew by 0.2 per cent in July 2022, but there are few near-term catalysts in the offing, even though the services sector remains in positive territory. Kitty Ussher, Chief Economist at the Institute of Directors, said: “Given all the talk of recession, businesses will be reassured to hear that the economy grew in July, at around its long-term trend rate. When looking at the last three months together, it shows the economy flatlining as the impact of higher inflation works its way through the system”. The extent to which this will continue or perhaps head firmly into negative territory is difficult to gauge. Energy remains the chief bugbear, as it is with the rest of Europe, so markets will be trying to get a steer on what Ukraine’s recent successes on the battlefield mean for the conflict and its likely duration.
Read more on this:
Will Trussonomics avert a UK recession?
How bad will a UK recession be?
Receivers move in on Evergrande HK
The Evergrande saga continues to weigh on investor sentiment. It has emerged that the property group’s Hong Kong headquarters has been seized by a lender after Evergrande defaulted on a loan and twice failed to sell the 26-storey Wan Chai office tower, which is valued at roughly $1.2bn (£1.15bn).
In addition to its property sector woes, the world's second biggest economy has been forced to deal with the impact of severe drought, rising youth unemployment and stalling growth. Official surveys released have revealed that China's manufacturing industry contracted in August for the first time in three months. Food prices are also steadily increasing, which, along with the rising youth unemployment rate, could lead to civil unrest.
All this has been made worse by Beijing’s fixation with a zero-Covid policy that has triggered lockdowns in some of the nation’s largest conurbations. And though the renminbi has depreciated against the US dollar, an export-led recovery is unlikely given falling aggregate demand in the global economy.
