Positive Week

28th August 2015

Ian Copelin, Investment Director, my wealth comments “US data yesterday showed the US economy grew more than previously estimated in the second quarter due to consumer and business spending.  US GDP rose at a revised annualised rate of 3.7% (up from the initial estimate of 2.3% reported last month) exceeding economists’ estimates.

US equities rose on the news, with the Dow Jones closing up 369.26 points, or 2.27%, at 16,654.77.  The index has now recouped 988.33 points in the last two days – more than half the losses it sustained in the past two weeks, after China decided to devalue its currency.  Likewise, the S&P 500, having risen 3.9% on Wednesday, climbed a further 2.43% yesterday – resulting in the index having its biggest two-day rise since 2009.  Consequently, both indices are now showing gains on the week!

The market was also encouraged by a rebound in the Chinese stock market and comments from William Dudley, president of the New York Federal Reserve Bank.

In China, the Shanghai Composite Index rose 5.34% on Wednesday, its first gain in six days.  The Shanghai Composite Index rose a further 4.82% overnight.  While the index is still down 37.42% since its high on 12 June, it is down just 0.09% since the start of the year and up 47.31% over the past 12 months.

William Dudley said that while it was “important not to overreact to short-term market developments”,  the case for a US interest rate rise, the first in nearly a decade, at the next Federal Open Market Committee (FOMC) meeting in September was now “less compelling” given China’s economic slowdown and the fall in oil prices.

In the UK, the FTSE-100 is currently down 3 points on the day at 6,189 – and up 1.5 points on the week.”