Yuan a fight?

  • Weekly market update
  • 2 minute read


  • US-China trade tensions weighed on global equity markets in GBP terms. The US fell the least, at -1.48%, followed by Europe (-2.00%), the UK (-2.13%), and Japan (-2.23%). Emerging Markets were the laggards down -3.71%.
  • UK gilts rose +0.87%, and UK corporate bonds fell 0.06%. European government bonds fell -0.04% in local terms, whilst US government bonds rose +0.41%.
  • GBP depreciated -1.33% vs USD, -1.57% vs EUR and -2.37% vs JPY.
  • In USD terms, the oil price fell -0.45% while gold rose +0.67%.


  • The US and China trade negotiation deadline passed without a deal agreed on Friday. With no deal in place, the US increased tariffs on $200bn of Chinese goods from 10% to 25%, with 25% threatened on an additional $325bn of goods. According to the US, the escalation was due to China allegedly reopening segments of the deal already agreed. China has retaliated with tariffs on $60bn of US goods. A prolonged escalation of the trade dispute is likely to weigh on Chinese growth, a concern for investors holding assets exposed to global growth.
  • UK Q1 GDP growth accelerated to 0.5% QoQ, equating to 1.8% YoY. GDP growth was bolstered by stronger than expected consumption growth, supported by a resilient labour market. Factory output rebounded significantly, as manufacturers built up inventories in case of a “No Deal” Brexit in March. Brexit related risk also resulted in very strong import growth weighing on net trade. Given the “one-off” nature of some of these effects, growth may decelerate from here. A resolution to Brexit negotiations before the October deadline seems unlikely at this stage.
  • US CPI inflation increased by 0.3% month-on-month, driven mainly by a rise in energy prices, which has lifted the YoY figure to 2% from 1.9%. While core services prices have risen, core goods prices declined -0.3% from the previous month, the steepest decline since November 2006. With wage growth decelerating and contained inflation, we do not see a catalyst for the Federal Reserve to adopt a more hawkish policy stance in the near term.

Our view

  • Global growth has weakened somewhat, but Chinese stimulus, better survey data and accommodative monetary policy lead us to expect growth to improve.
  • While geopolitical risk remains elevated, relations have thawed a little and we believe this remains an environment favouring equities over bonds.
  • Within our regional equity allocation, we favour those regions most attractively positioned to benefit from the improvement in the global growth dynamic.

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Important information
The information contained in this article is believed to be correct but cannot be guaranteed. Past performance is not a reliable indicator of future results. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may not get back the original amount invested. Opinions constitute our judgment as at the date shown and are subject to change without notice. This article is not intended as an offer or solicitation to buy or sell securities, nor does it constitute a personal recommendation. Where links to third party websites are provided, Close Brothers Asset Management accepts no responsibility for the content of such websites nor the services, products or items offered through such websites. CBAM5596.


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