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China stuck in reverse

Published Thursday, October 1st, 2015

As for as understatements go, to say that market participants will have taken heart from the drawing down of the curtain on the latest quarter is well and truly up there. Although global equities indices ended what was a miserable three months on a positive note with gains of up to 2%, the period saw heavy losses across the board in what was the worst quarterly performance since 2011. London’s FTSE 100 lost 7%, the Dow Jones tumbled 8%, the Eurofirst 300 ended 9% in the red and Shanghai’s Composite Index saw the value of its components drop by a hefty 25%.

Yesterday’s bout of risk appetite may have been driven by end-of-quarter portfolio readjusting but one clear supportive factor was news that the eurozone once again fell victim to the dogged enemy that is deflation. Prices across the bloc dipped by 0.1% in September from a year ago in what the first return into negative price growth for six months and stoked expectations that the ECB will be forced to expand its €1.1 trillion asset-buying programme. The prospect of increased liquidity bolstered investor sentiment which was further supported by data pointing to a continued and gradual recovery in the zone’s labour market.

An update on the health of the jobs market was also on the agenda in the US where the private-sector ADP report revealed that a solid 200,000 positions had been added in September. The forecast-beating figure sets the scene for a solid non-farm payrolls number tomorrow which is expected to come in at +200,000 following August’s disappointing 173,000 increase.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.