Equity markets started the week as they finished last week, on the front foot. Cyclically sensitive sectors had a better day, briefly reversing the trend for growth over value. Commodity sectors were boosted on Monday as Beijing announced it wants to make it easier for financial institutions with trillions of dollars of assets to invest in raw materials. The exception to the broader commodity rally was the oil price which fell to a fresh low for the year on Tuesday as supply concerns continue.
Commodity prices reversed Monday’s move on Tuesday despite Fitch forecasting that they see faster economic growth in 2018 as they published their Global Economic Outlook. They forecast global economic growth for this year at 2.9% and 3.1% for the following year. Commodity traders may have focused on Fitch’s comments on their view of the Chinese economy in the coming years as they forecast a slowdown in growth to 5.9pct in 2018 and 5.8% the year after. Current forecasts for this year for the Chinese economy to grow around 6.7%. Forecasts for Chinese economic growth in 2018 vary from close to 6.5% from the IMF and the World Bank to as low as 4.5% from the Economist Intelligence Unit. US equities ended Tuesday’s trading near lows of the day having broken more records on Monday. The fact that the price of oil has fallen back into bear territory possibly also fed through into other risk assets.
The delayed Mansion House speech due to the tragic events at the Grenfell Tower took place early on Tuesday morning. Mr Hammond’s speech did little to add to the sum total of world knowledge, however, Mark Carney had more of an impact. The Chancellor pushed the soft Brexit line and set out plans to give the “austerity-weary” Britain a boost. Probably trying to woo back some disaffected supporters after the election result. Mark Carney dampened speculation that UK interest rates are likely to rise in the short term after the more hawkish vote at last week’s Bank of Interest rate meeting. His comments sent sterling lower, however this did little to help the FTSE 100 performance.