US Growth Undershoots and China’s Regulatory Clampdown Continues


Archived Article

This article was correct at the time of publishing however the information contained within it will no longer be current. It may also no longer reflect our views on this topic.


US Growth Undershoots and China’s Regulatory Clampdown Continues

The US economy grew at one of the fastest rates in history in Q2 with an annualised rate of 6.5% according to an initial estimate of Gross Domestic Product (GDP). However, this represented a fairly substantial undershoot versus consensus forecasts which anticipated a rate of 8.5%.  The US trade balance detracted from the reading as imports outstripped exports, whilst inventory levels also detracted.  Supply bottlenecks have been a common occurrence in a number of industries as lockdown restrictions have eased worldwide. Personal consumption exceeded forecasts, growing strongly at 11.8%.[1]

Chinese stocks however suffered heavy losses early in the week as regulators again turned the focus on its own tech companies in an effort to bring about greater domestic competitiveness. Online education companies were the latest industry in focus, but heavy selling led Beijing regulators to then take steps to soothe investor concerns.  Speaking to executives of major investment banks around the world, the China Securities Regulatory Commission sought to reassure them that a recent crackdown on e-commerce and online education was not going to spiral into other sectors. The China CSI 300 index closed the week some -5.5% lower.

US and UK equity markets were largely unmoved over the course of the week; the American S&P 500 index losing -0.4% and the UK’s FTSE 100 up +0.1%.  Elsewhere, shares in Europe were also little changed whilst Japan’s Nikkei 225 index fell -1.0%.

US Treasuries continued to see volatility as the yield on the 10-year note dropped to 1.23% from 1.30% the previous week.  The US Federal Open Market Committee’s statement following its two-day policy meeting again referred to inflationary pressures as transitory but suggested some progress had been made towards its goals to begin tapering asset purchase programme. The central bank ultimately chose to keep interest rates and bond purchases unchanged.

The price of oil climbed modestly last week. A barrel of West Texas Intermediate crude rising to $73.81 at Friday’s close from $72.20 a week earlier.


Week Ahead

The first Friday of a new month brings the latest US Labour Report.  The unemployment rate is expected to continue its improving trajectory and edge 20 basis points lower to 5.7%, whilst the non-farm payroll change is forecast to show 875k new jobs created. 

With a raft of Purchasing Managers Index (PMI) data releases due this week, a measure of business activity, the US publication from the Institute for Supply Management will be closely watched given modestly weaker data at the last reading.

The Bank of England’s Monetary Policy Committee meets on Thursday.  Despite a number of members voicing concerns in recent months that the bank’s asset purchase programme could lead the economy to overheat, the committees vote is still expected to result in no change at this stage. [2]


Read last week's market update

Equities Recover Lost Ground as Delta Fears Ease



Market data: FE Analytics


[1] BEA - Annual Update -  29.07.21

[2] Forex Factory - 25.07.21


The value of an investment may fall as well as rise. You may get back less than the amount invested.

The value of investments may fall as well as rise purely on account of exchange rate fluctuations.

Past performance is not indicative of future performance.

Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2021. FTSE Russell is a trading name of certain of the LSE Group companies. “FTSE Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

© S&P Dow Jones LLC 2021. All rights reserved.

The information contained does not constitute investment advice. It is not intended to state, indicate or imply that current or past results are indicative of future results or expectations.

Full advice should be taken to evaluate the risks, consequences and suitability of any prospective investment. Opinions provided are subject to change in the future as they may be influenced by changes in regulation or market conditions. Where the opinions of third parties are offered, these may not necessarily reflect those of Rowan Dartington.

Rowan Dartington is part of the St. James’s Place Wealth Management Group. Rowan Dartington & Co. Limited is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales No. 02752304 at St. James’s Place House, 1 Tetbury Road, Cirencester, England, GL7 1FP, United Kingdom.