Global equities have moved lower today amid renewed concerns over lending standards and credit risk at U.S. regional banks. Two recent auto sector bankruptcies in the U.S. have heightened investor anxiety, particularly as some regional banks appear to have direct exposure to these businesses, resulting in significant losses.
Tensions between the US and China appeared to reignite this week as Beijing dramatically tightened controls over rare earth exports. In response, President Trump threatened to impose 100% tariffs on Chinese goods, unsettling markets with fears of another trade war rollercoaster. However, he later softened his stance, stating that “highly respected President Xi just had a bad moment” and assuring that “all will be fine.” Markets remain sceptical, given the volatility surrounding trade relations in recent years. Nonetheless, a potential face-to-face meeting between Trump and Xi in Korea at the end of the month suggests both sides may be seeking a path toward resolution.
The US government remains in deadlock as the Senate met on Tuesday but failed to reach a consensus, falling short of the 60 votes required to move forward. The shutdown has now entered its third week, making it one of the longest in recent years. President Trump did fulfil his promise to ensure active-duty military personnel received their mid-month pay cheque, but hundreds of thousands of federal employees remain on furlough without pay.
UK GDP grew by 0.1% in August (month-on-month), following a downward revision of July’s figure to -0.1%. The manufacturing sector contributed positively, with a notable uplift in pharmaceutical output. This encouraging data comes at a crucial time for Chancellor Reeves ahead of the autumn budget and supports the UK’s trajectory to become the second-fastest growing economy in the G7, according to IMF forecasts.
Additional UK data released this week showed wage growth (excluding bonuses) easing to 4.7%, while the unemployment rate edged up to 4.8% in August after holding steady at 4.7% for three consecutive months. According to the Office for National Statistics (ONS), the slowdown in the labour market appears to be stabilising, following sharper declines earlier in the year—partly attributed to the national insurance increase introduced by Chancellor Reeves in April. Persistent strength in wage growth has long been a key concern for the Bank of England (BoE), which has maintained that it must moderate before further rate cuts can be considered. However, attention remains firmly on the November budget, with expectations for any near-term rate cuts remaining low.
Staying within Europe, France is facing its most severe political crisis in decades—and the drama continues this week. In what could be described as the biggest ‘Uno reverse card’ of the year, President Macron reappointed Prime Minister Lecornu just four days after his resignation. Lecornu then survived two no-confidence votes in parliament, having pledged to suspend Macron’s highly controversial pension reform—a move that secured backing from the Socialist Party. While this may be seen as a battle won, the war continues, Lecornu must now present a credible budget aimed at reducing France’s budget deficit and its public debt-to-GDP ratio.
French businessman and LVMH CEO Bernard Arnault saw his net worth rise by nearly $20 billion this week, following a strong earnings report driven by renewed demand from China. The world’s largest luxury goods conglomerate—home to 75 “maisons” including Louis Vuitton, Christian Dior, and TAG Heuer—posted its first quarter of growth this year, marking a turning point for a sector that has struggled since the post-pandemic boom faded. LVMH shares surged almost 10% over the week, reflecting investor optimism.
In Japan, Ms Takaichi’s bid to become the country’s first female prime minister was cast into doubt after her coalition partner, Komeito, withdrew support amid concerns over a months-long political funding scandal. Takaichi had recently been selected to replace the outgoing Prime Minister Ishiba. Her reputation as a student of Abenomics sent equities higher and weakened the yen. Meanwhile, the opposition Constitutional Democratic Party has endorsed a deal for Mr Tamaki, leader of the Democratic People’s Party, to challenge Takaichi for the premiership—setting the stage for a contentious leadership battle ahead of the vote at the end of the month.
Government bond yields have drifted lower this week, with concerns around U.S. regional banks providing additional support to the asset class. We’ve also seen continued strength in gold and silver, which remain on an upward trajectory. Our allocations to government bonds and precious metals have helped cushion portfolios against some of the equity market volatility experienced this week.
Nathan Amaning, Investment Analyst
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