Market Review from Redmayne Bentley

The Office of Budget of Responsibility was trumpeted by the coalition as an independent body that would ensure independence from political meddling as its role was to provide independent economic forecasts for the budget and judge whether the Chancellor was cutting the deficit quickly enough.  According to the Government, its overriding aim when establishing the Office was to bolster confidence in Britain’s credit worthiness and safeguard its credit rating.  Opponents, however, have criticised it, saying it is merely a vehicle to help shield the Government from the most austere spending cuts since the war and that it is not truly independent.  Those arguing this case were given a boost in the week when it was announced that the Chairman, Alan Budd, one of the country’s leading economists and a founder member of the Bank of England’s Monetary Policy Committee in 1997, intends to return to the private sector, as he has confirmed that he does not wish to remain after his three month contract expires. Both the Treasury and the City had assumed that he would remain on board until the OBR became a permanent legal institution later in the year.  It is also questionable now whether or not the two other members, former Royal Bank of Scotland Chief Economist Geoffrey Dicks and Graham Parker, who used to head the Treasury’s Public Finance Committee, will take up permanent positions once the office becomes enshrined in law.  There also appears to be no clear candidate to replace him.  Speculation is rife as to why Sir Alan is leaving and it largely appears to be centred on the view that Mr Budd believes that his independence has been called into question by the way in which the Government handled the story last week, based on a Treasury leak, that measures in the budget would cost 1.3 million jobs across the public and private sectors.  This leak came on the eve of David Cameron’s appearance at Prime Minister’s question time and it would appear that in order to strengthen his position in the house the OBR report, which had been planned to be released on Thursday, was published early giving Mr Cameron ammunition to fight back.  The OBR report said that the economy would create some 2 million jobs over the next five years, which I believe is very questionable.  It is understood that Sir Alan saw this as political medalling and the Government’s use of the OBR for shielding its aggressive policies as too intolerable. 

 

Reflecting the austerity measures, the International Monetary Fund this week cut its growth forecast for the UK economy for 2011 from 2.5 per cent to 2.1 per cent, interestingly taking it below the forecasts of the OBR, which suggests growth of 2.3 per cent.  Overall, however, the International Monetary Fund has raised its forecast for global growth this year from 4.2 per cent to 4.6 per cent.  Its forecast for the US economy has also increased from 2.7 per cent to 3.3 per cent, whilst the Euro zone nations were left unchanged at 1 per cent.  China’s growth rate was increased from 10 per cent to 10.5 per cent and India’s to 9.4 per cent from 8.8 per cent.  Whilst generally upping forecasts, the IMF warned that the risk of a slowdown in the global economy has risen sharply, although it thought governments should continue planning to tighten fiscal policy “In the nearer term, the main risk is an escalation of financial stress and contagion, prompted by rising concern over sovereign risk.  This could lead to additional increases in funding costs and weaker balance sheets and, hence, to tighter lending conditions, declining business and consumer confidence, and abrupt changes in relative exchange rates.”  The debate as to whether the UK economy will hit a double-dip recession continues to  heat up and, during the week, a survey released by Deloitte’s showed that optimism amongst Britain’s finance directors of the UK’s largest companies has dropped to a 12 month low.  The quarterly survey showed that they now believe that there is a 38 per cent chance of the country falling back into recession, compared to 33 per cent three months ago.  Those who were optimistic had dropped from 40 per cent to 24 per cent. As expected, the European Central Bank held Euro zone interest rates at a record low of 1 per cent for the fourteenth consecutive month last week, whilst the Bank of England also kept interest rates unchanged for the sixteenth consecutive month at 0.5 per cent, due to the fact that recovery from recession remains fragile as austerity packages are unveiled and slowly implemented. The MPC revealed in the week that Martin Weale, the Director of the National Institute of Academic and Social Research, has been appointed as an external member of the Bank of England’s Monetary Policy Committee, replacing Kate Barker, who left the Committee at the end of May.  Mr Weale, who is known for his strong views that neither the Government nor the British are saving enough, was chosen from 38 applicants.  He is understood to be fairly relaxed about the need for austerity measures but has, nonetheless, argued that they are unnecessarily tough and this is likely to see him vote to keep interest rates low for some time.  The decision to appoint Weale means that for the first time since its creation in 1997, the Committee is now all male.  He will take up his position at the August rate setting meeting.

 

UK manufacturing output rose in May at its fastest annual rate in fifteen and a half years and it increased on the month, as electrical goods production surged.  The ONS said manufacturing output rose 0.3 per cent on the month in May and grew 4.3 per cent on the year.  The annual gain was the largest since a 6.2 per cent increase in December 1994. The number compares with a monthly fall of 0.8 per cent in April.  The Figures met market expectations.  According to the Markit/CIPS UK Services Managers Index, Britain’s service sector expanded in June but at the slowest rate in ten months.  The reading came in at 54.4 down from 55.4 in May, below market expectations of 55.  According to the British Chamber of Commerce, the UK economy continues to grow and it is predicting growth for the three months until the end of June of between 0.6 per cent and 0.7 per cent.  The Board also believes that the MPC will keep UK interest rates on hold until at least May 2011, due to Government austerity measures.  UK car sales are predicted to rise 20 per cent in 2010 with June seeing a 11 per cent rise in new car registrations, marking the twelfth monthly increase in a row, despite the end of the Government’s scrapage scheme.  In June, just 0.7 per cent of registrations came from the scrapage scheme, which closed to new orders in March, compared with 19.2 per cent during the same period last year.  The drive in growth came largely from the corporate fleet market, which during the month saw registrations rise some 25.3 per cent.  Overall, new car registrations were up 19.9 per cent, or 180,000 vehicles, giving a first half figure of 1.1 million vehicles.  Over the past twelve months the Society of Motor Manufacturers and Traders said the market has grown by 20.4 per cent to 2.179 million vehicles.  However, it warned that sales are likely to dip by the end of the year. According to an authoritative report issued in the week by BNP Paribas Real Estate, the commercial property market will not regain the value lost during the crash for more than 15 years.  They believe that it will be 2025 at the earliest before commercial property values reach similar levels to those seen in 2006/7.  According to the Halifax, property prices fell for their third consecutive month in June, with the average price of a home falling by 0.6 per cent to £166,203.  This follows a decline of 0.5 per cent in May and a 0.1 per cent decline in April.  Overall, they are 6.3 per cent higher than a year ago and 7.5 per cent above their April 2009 low.

 

The U.K. economy grew at a slower pace in the second quarter than in the three months to May, as industry output eased, highlighting the fragility of the country's economic recovery, a leading economic research group said Tuesday. The National Institute of Economic and Social Research said it estimated that gross domestic product in the three months to June grew by 0.7%, compared with the first quarter from January to March, down from the 0.9% rise recorded in the three months to May. The slowdown in growth reported by NIESR is in line with U.K. manufacturing survey data, with the purchasing managers manufacturing index for June showing a slower rate of expansion after reaching a fifteen-and-a-half month high in both April and May. Looking ahead, NIESR said the U.K. economy faced various headwinds, particularly from austerity budgets at home and in some euro-zone countries. Lower petrol and food costs pushed the prices Britain's producers charged for their goods down 0.3pc, which will ease some upward pressure on inflation. A fall in output prices, compared with a 0.1pc rise in May, was the first monthly fall since November 2008 and surprised economists, who were expecting a 0.1pc rise. The Office for National Statistics data showed petrol prices were 1.6pc lower and food prices were down 0.5pc annual output inflation fell to 5.1pc, from 5.5pc in May.

 

The U.K.'s global goods trade deficit widened more than expected in May as imports increased to their highest level for almost two years while exports stagnated, the Office for National Statistics said Friday. The goods trade deficit widened to £8.1 billion in May from an upwardly revised £7.4 billion in April. Economists were expecting the deficit to shrink to £6.8 billion. The figures showed total goods imported increased 2.4% from April to GBP29.5 billion in May, the highest total since July 2008, while exports rose just 0.2% to GBP21.5 billion, marginally below the level in March. Prime Minister David Cameron has put export growth, particularly to developing economies like India and China, and the rebalancing of the economy towards manufacturing as a central policy goal of his young coalition government. But sluggish growth in Europe and a recent strengthening of the pound against the euro has raised concerns about the outlook for sales of U.K. goods there. The ONS said the goods trade deficit with EU countries grew to GBP3.6 billion from GBP3.4 billion in April. Although exports to EU countries hit the highest level since September 2008, imports increased to the strongest level since July 2008.  The number of U.K. companies missing sales and earnings targets may increase as the government’s spending cuts to reduce the budget deficit hit the “fragile” recovery, Ernst & Young have said. whilst the number of companies issuing profit warnings fell to 45 in the second quarter, the lowest in seven years, from 54 in the previous three months, warnings may increase later this year, Ernst & Young said in its regular update.

 

Meredith Whitney, Wall Street's star banking analyst, best known for managing to wipe $369bn (£245bn) from the value of global equities in a single day in October 2007 after accurately warning that Citigroup needed to raise an extra $30bn, on Friday she slashed her expectations for Goldman Sachs' second-quarter profit by almost two-thirds ahead of the start of the US earnings season. Goldman is due to publish its second-quarter results, on July 20. Her view is that the conditions in Goldman's most recent quarter were the "worst" in more than a year for parts of its business, as a result of reduced trading volumes. Her new forecast is for profits to fall from her earlier estimate of $2.59bn to $928m. The bank is also likely to see higher legal costs as a result of its ongoing dispute with the Securities and Exchange Commission, as well as setting aside money to fund its share of the UK's bonus tax. In light of it political difficulties more record profits from the group would be very counterproductive and if rivals do not suffer a similar fate with earnings in the next few weeks then suspicions that this is more manipulation by the embattled bank will surely surface. If earnings across the sector fall similarly then underlying stock values in the sector will look punchy. Goldman Sachs is being sued by Liberty Mutual Insurance Co. and is accused of making misleading statements in connection with the 2007 preferred-stock offerings for Fannie Mae. According to the papers lodged in the week, they accuse Goldman of misrepresented the health of Fannie Mae when it underwrote an offering in which the insurance company made $62.5 million in investments. The investment bank also misstated the purpose of the stock sale, Liberty Mutual said, saying the offering was to raise surplus capital for the mortgage company when it was needed to help Fannie Mae sustain its business. Troubled mortgage finance giants Fannie Mae and Freddie Mac lost there listings on the New York Stock Exchange at the end of business on Wednesday and on Thursday, Fannie and Freddie started trading on the over-the-counter bulletin board also known as pink sheets. The Treasury Department has injected $83.6 billion into Fannie and $61.3 billion into Freddie to cover losses on the trillions of dollars' worth of mortgage-backed securities they own or guarantee. Whilst the bailout money helped put a floor under the housing market, the two companies have still been losing huge sums and are predicted to lose billions in the coming years. Last month the Federal Housing Finance Agency (FHFA) ordered both companies to delist from NYSE, saying the decision was based on the weak stock price for both companies, not due to any change in condition at the firms or outlook for their futures. It and its predecessor agency have overseen Fannie and Freddie since September 2008, when they were both placed under conservatorship, a form of control similar to a bankruptcy process and Despite there problems, They are still a main source of funding for US mortgage lenders and without the two of firms, lending to home buyers would have completely dried up and the property prices plunge creating further economic mayhem and losses in the banking. States can’t count on the federal government for more budget bailouts, the head of President Barack Obama’s debt commission told governors over the weekend. States have projected total budget deficits of $127 billion through 2012, according to a report last month by the governors association and the National Association of State Budget Officers.

 

Numbers in the week from the Federal Reserve showed that consumer credit fell in May for the fourth consecutive month as outstanding Consumer credit fell at a seasonally adjusted annual rate of 4.5%, down $9.1 billion to $2.415 trillion, outstripping the $2.0 billion decline that economists had been expecting. The number of consumers behind on their credit card payments fell to an eight-year low in the first quarter of 2010, the American Bankers Association said Wednesday. Overall, delinquencies across a wide-range of consumer debt categories have also fallen. About 3.88% of bank credit card accounts were past due by 30 days or more in the first quarter of the year the first time since 2002 that the rate has fallen below 4%, the ABA said that the ABA's composite ratio, which tracks delinquencies across eight key categories, fell to 2.98% from 3.19% the previous quarter a sign of modest improvement in the U.S. economy, the group said. The US service sector grew in June, at its slowest pace since February, according to a survey by the Institute for Supply Management. It was the sixth month in a row that this key component of the US economy expanded. The ISM, a trade group of purchasing executives, said its service sector index fell to 53.8 from 55.4 in May. A reading above 50 indicates expansion in the sector, while a reading below 50 indicates shrinkage.

 

Retail sales in the 16-nation euro zone rose by 0.2 percent in May from the previous month and by 0.4 percent across the 27 European Union nations, the statistics agency Eurostat reported on Monday. The highest increases in retail trade were posted by Denmark, up 3.8 percent, followed by Poland with 3.5 percent and Estonia with 1.7 percent. The largest drops were recorded in Malta, down 3.8 percent and Portugal, where sales fell 0.8 percent. German manufacturing orders unexpectedly fell 0.5% in May compared with the previous month as fewer big-ticket orders and a decline in demand for metals products weighed, government data showed Wednesday. Economists had expected a 0.5% increase. Year-on-year Orders were up 24.8% roughly in line with expectations following upward revisions to last month’s data. However, German exports surged and industrial production showed big gains in May, with many of the country’s manufacturers singling out China as the driver for Europe’s largest economy. Industrial production rose 2.6 per cent in May, extending a 1.2 per cent gain a month earlier, with the economics ministry in Berlin reporting “above average growth rates” in the metal-working and car making sectors. Seasonally adjusted exports rose 9.2 per cent against the previous month almost as fast as the 10.8 per cent gain in March, the fastest month-on-month rise seen by the statistical office since the early 1990s. In April, exports had fallen 6.3 per cent but that figure now appears to have been an anomaly. Economists also took comfort from a surge in imports, which rose 14.8 per cent in May compared with April. Since May last year, when continental Europe was in the midst of the recession German exports have risen 28.8 per cent and those to markets outside the European Union by 39.5 per cent. Whilst Europe and the US remain Germany’s largest export markets, some worry that German manufacturing might be becoming too dependent for growth on China at a time when the euro is again gaining strength

 

Chinese exports soared at an annual rate of 44 per cent in June, a new record level, easing fears about a new global slowdown but focusing attention again on whether the Chinese currency is undervalued. The Obama administration refrained from labelling China as a “currency manipulator” in a report released last week, although it said that the Yuan “remains undervalued”.  The US Treasury said that the Yuan "remains undervalued" and needs to rise. Tim Geithner, the Treasury Secretary, said he would be "closely" monitoring how fast the Chinese currency appreciates against the dollar as internal US pressure mounts fit taking more direct action against china. The surge in exports saw China's June trade surplus hit $20bn ahead of Mays $19.5bn. Economists had been forecasting a 38pc jump in exports, and a $13.8bn surplus. The June figures showed no signs of the expected slowdown in Chinese growth that has increasingly worried investors in recent weeks, with exports to Europe annually increasing 43 per cent and to the US by 44 per cent, while exports to Russia increased by 84pc and goods sold to Brazil jumped by 125pc.  Some analysts highlighted that the strong increase in June might be down to producers moving forward exports of steel goods, before the removal of an export tax rebate on July 15. In dollar terms, exports increased from $131.76bn in May to $137.39bn. Imports grew by an annual rate of 34.1 per cent in June down from the 48.3 per cent expansion in May, which may be an indication that measures to slow the property market are already having an impact on demand for commodities. South Korea's central bank unexpectedly raised interest rates for the first time in the week since the onset of the global financial crisis. The Bank of Korea increased the rate from a record low of 2% to 2.25%. It also forecast continued economic recovery, despite sluggish growth in many overseas economies, and warned of increasing inflationary pressures. South Korea is following other economies such as Australia and Malaysia in raising rates.

 

The market is currently fully focused on the 23rd July, as this is the date that the all-important European banking stress test results will be released.  Authorities know that they need to instil confidence into the sector and at the moment they are following the lead of the American’s bank stress tests last year, which marked the turning point for the US banks.  Of the 19 banks that were included, ten required further funding and this saw$75 billion worth of extra capital having to be raised.  Critics, however, point out that the US exercise was too focused on the top tier and since then we have seen many hundreds of regional banks fail.  European regulators have made the exercise more credible lately, by expanding it to 91 lenders and including a sovereign debt sell-off in the calculations.  At this time, however, I continue to remain concerned that the assumptions remain opaque.  The list of 91 lenders included in the test represented 65 per cent of Europe’s banking assets and at least half the banking assets in each country.  Policy makers have bowed to market pressure and included a sovereign debt shock amongst the scenarios, although suggestions are that the level of decline in sovereign debt will be significantly lower than what markets are currently suggesting.  The market is eagerly awaiting details on European stress test methodology and leaks indicated that trading books take a ‘haircut’ on government bonds of around 17% for Greek debt, 8% for Portuguese debt, 5% for Spanish, 0.7% for French with no haircut on German bunds, with additional haircuts being said to be imposed on government debt held to maturity. Greek bonds currently trade at around 53% (30 year bond) and 92% (2 year bond) to face value. Similar calculations for Spain and Portugal are thought to be at around 1% and 4% respectively, whilst markets are implying a larger default risk and haircut for these sovereigns. Unlike the U.S. government, EU governments haven’t said if they will provide cash to banks that fail the tests, and economists say countries including Spain and Portugal will struggle to fund any bailout. European lenders had $2.29 trillion at risk in Greece, Italy, Portugal and Spain at the end of 2009, including loans to governments, according to the Bank for International Settlements. In simulated stress test run by Citigroup on 13 European banks which included sovereign debt and loan losses, National Bank of Greece SA, Dexia SA and Commerzbank AG were the lenders who came out the poorest. Regulators have also not spelled out how much detail banks will have to disclose.  With the US stress test last year, banks were forced to produce a summary of balance sheets, allowing investors to make up their own mind about whether the tests had been sufficiently severe and the worry remains that the European bar will not set high enough.  Investors know that the European authorities want this problem to go away and for European interbank lending to return.  They also know that this needs to be done without creating any major panic, as investors continue to question whether or not many of the financial institutions can operate on a stand-alone basis and whether or not they could deal with another major crisis.  For the European authorities the best outcome would be to demonstrate that the banks are broadly fine, with perhaps a little bit of capital raising by some of the troubled one as they hope to ease market worries. John Lipsky, one of the highest officials at the International Monetary Fund, said he expects stress tests of European banks to be based on “realistic scenarios.” On the whole I believe the exercise will be nothing more than smoke and mirrors as they do not look designed to reflect reality and will not push the banks as hard as investors want. If they did  then a number of banks would fail and need significant new infusions of capital and this would have to come from governments who are finding it impossible or near impossible to borrow any money on the international money markets. The key for the authorities in the stress tests will be how high the set the bar.  If it is set too low, then investors will automatically assume that there are significant problems which do not want to be probed by the authorities and Investors will run scared. This would cause more serious turmoil in the markets and could ultimately unleash the opposite forces to which the European authorities had hoped to influence.  They are clearly aware of this and so every investor should be aware of this date, as it could well set the scene for the market’s performance for the rest of the year. It is thought that European banks are looking to tap the bond markets in the coming weeks in an attempt to secure financing ahead of the results of the stress tests. Last week was the busiest for bank issuance in the region since mid-April, according to data from Dealogic, with €18.4bn of bonds sold up nearly fourfold on the previous week’s €4.8bn. Banks including Barclays, BNP Paribas, HSBC and UBS took advantage of improving investor sentiment to lock in long-term funds.

 

It emerged last week that one or more banks had lent 380 tonnes of gold to the Bank of International Settlements in return for foreign currencies and this caused widespread surprise and confusion.  In a tiny footnote in its annual report, the bank disclosed its unusually large holding of gold, compared with zero in the previous year. Gold subsequently fell below $1,200 for the first time in more than a month but retained the level to close the week at US$1,211/oz. I believe that it looks like the BIS is swapping gold with a troubled central bank possibly in the troubled southern economies of Europe in a complex arrangement. This is because the BIS emailed a statement saying that the swaps had not been conducted with monetary authorities, after the IMF was thought to be the other counterparty, but purely with commercial banks.  According to the World Gold Council, central banks in Greece, Spain and Portugal held 112.2, 281.6 and 382.5 tons of gold respectively in June leading analysts to suggest it may be Portugal, or a combination of the three. I believe that the whole cat and mouse charade that took place over the week in the gold market shows that the whole affair is a secretive European bailout that a single country wants to keep quiet.

 

Crude for August delivery close 65 cents higher on Friday at $76.09 a barrel, the first day prices rose above $76 in eight sessions. Oil rose 5.5%, in the week, its best week since late May. Anadarko, the 35pc partner of BP in its gushing Gulf of Mexico well on Friday refused to pay a $272m (£180m) bill,   claiming that BP's actions "likely represent gross negligence or wilful misconduct." BP expressed "disappointment that they have failed to live up to their obligations" Mitsui, a 10pc partner, did not respond to BP's request for $110m but said it had until July 12 to give an answer. Both Mitsui and Anadarko, as co-owners of the well, are likely to face legal action along with BP and contractors such as Transocean and Halliburton. On Friday, Eric Holder, the US Attorney General, said the criminal investigation into the Gulf Coast oil spill may target more companies than simply BP.

 

In the week ahead UK investors will be focused on Wednesday, when the latest unemployment numbers are released. On Monday, third quarter GDP figures are expected to be unchanged, with quarter on quarter growth forecast to be about 0.3 per cent.  The ONS also publishes its Retail and Consumer Price Index numbers on Tuesday, when the numbers are expected to be little changed from the previous months, when RPI was recorded at 5.1 per cent and CPI at 3.4 per cent, CPI is expected to come in at 3.2%.The British Retail Consortium issues its retail sales monitor figures for June on the same day and the numbers are expected to show a modest improvement as consumers enjoyed better weather, Wimbledon and the World Cup. Monday sees the start of the second quarter reporting season with a total of 21 S&P 500 companies will announce results this week, with most of the rest spread out over the next three weeks. Dow components Alcoa starts the season With Four other Dow components reporting this week: Intel on Tuesday, JPMorgan Chase on Thursday and General Electric and Bank of America on Friday. Also on tap: Google on Thursday and Citigroup on Friday. The US week ahead will bring reports on retail sales, jobs, consumer sentiment and inflation. On Tuesday, The trade balance is expected to have fallen to $39.5 billion in May from $40.3 billion in April. Retail sale on Wednesday are expected to have fallen 0.2% in June after having fallen 1.2% in May. Sales excluding volatile autos are expected to have held steady after falling 0.8% in April on same day the minutes from the last Federal Reserve policy meeting are due for release, along with Fed forecasts on the economy. The Producer Price Index, a measure of wholesale inflation, is due out on Thursday and the index is expected to have fallen 0.1% in June after falling 0.3% in May, suggesting inflation is not an issue at the present time.  On Friday the Consumer Price Index is announced and is expected to have held steady in June after falling 0.2% last month. Core CPI is expected to have risen 0.1% after rising 0.1% in the previous month. The revised reading on July consumer sentiment from the University of Michigan is also out when Sentiment is expected to have fallen to 74.5 from the previous reading of 76 from early July. The Bank of Japan looks set to hold interest rates at 0.1 per cent on Wednesday.

 

The FTSE 100 finishing 27.49 points higher at 5132.94 on Friday its fourth successive rise, finishing the week 6% ahead, its biggest weekly gain in almost a year. Although it has bounced back over the 5000 level, I believe we will be heading back down through it in the coming weeks.  U.S. stocks climbed again on Friday closing their best week in nearly 12 months, as investors focused on the second-quarter earnings season which starts this week. Analysts currently expect year-over-year growth of 27%, according to the latest figures from Thomson Reuters. The four-day rally last week represents a bounce back after the Dow sank to its lowest point since October, in its worst five-day performance leading up to July 4 since 1896. The Dow climbed 5.3% in the week or 512 points, its best weekly performance since the week ended July 17, 2009, although in a shortened holiday week low volumes may have artificially influenced the rise. The rally comes as investors have grown hopeful that the market's recent drop to 2010 lows may have been overdone. Analysts have however being reporting more downgrades than upgrades making prospective P/E's unreliable. Previous collapses in corporate profitability have been preceded by negative earnings revisions and the bears are well aware of this.

 

 It is understood that Standard Chartered has told clients to prepare for a fall in property prices of up to 30 per cent in some of China’s largest cities as the delayed effect of monetary tightening begins to bite.  If this were to occur, then I believe it will have a dramatic effect, not only on the Chinese stock market, which is down by some 50 per cent from it's high but also on global equity markets as investors fear a sharp slowdown in China’s economy. At the end of the week Rio Tinto's CEO Tom Albanese warned that Chinese GDP may pull back to 6 per cent this year from the expected range of 8 per cent to 9 per cent.  This much lower figure has not yet been factored into the markets and, if it proves to be correct, then equity prices look set to come under significant pressure as global growth worries run rampant in a fearful stock market environment. The Baltic Dry Index, a measure of commodity shipping costs, has fallen for the longest period in nine years now, as lower volumes of iron ore being shipped to China hit the market. The index of freight rates on international trade routes fell 38 points, or 2pc, to 1,902 points on Friday, its 31st straight decline. A sign I believe that things are slowing sharply in the nearer term. At the start of last week China’s benchmark stock index had recorded a 25 percent drop this year, before recovering by the end of the week and perhaps the Chinese know something which the rest of the world has yet to realise.

Leeds Financial and Leeds Solicitors at www.legalandfinancial100.co.uk