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MARKET UPDATE: ECONOMIC CONCERNS WEIGH ON SHARES

LAST WEEK – KEY TAKEAWAYS

Shares: Prospect of economic slowdown rattles markets

Global shares fell after the yield (the income paid) on long-term bonds issued by the UK and US governments dropped below the yield of their shorter-term equivalents, an effect known as an inversion of the yield curve;
Usually investors expect a higher return for putting their money away for a longer time- by demanding more for investing in the short term, they are indicating that they are concerned about the health of the economy;
Investors closely monitor the yield curve because in the past, an inversion has preceded an economic slowdown;
Trade tensions between the US and China appear to be the ultimate catalyst, as figures released last week showed slowing growth in the Chinese and German economies which both heavily rely on global trade.
Omnis view: It is too early to tell whether this inversion signals a recession. The major central banks are taking steps to support their domestic economies by keeping interest rates low or lowering them, although further escalation of trade tensions would raise the possibility of a slowdown (see below).

TRADE: US to delay tariffs on some chinese goods

There had been better news for global shares earlier in the week when US trade official Robert Lighthizer said the US would delay imposing the latest round of tariffs- taxes on companies importing products from abroad- on some Chinese goods from September until December
Mobile phones, laptops and video game consoles are among the goods exempt from tariffs, which means US consumers will not face inflated prices ahead of the festive shopping season;
However, later in the week China announced that it would respond to these additional tariffs by taking unspecified measures of its own.
Omnis view: The Chinese appear to have rebuffed US attempts at easing tensions. Whether or not upcoming talks between the two sides go ahead as planned and how these latest developments impact negotiations remains to be seen.

UK: Labour seek cross-party support to stop hard brexit

Sterling strengthened against the US dollar following the release of figures showing retail sales- a measure of consumer spending and a key driver of economic growth- unexpectedly rose in July;
Sterling received another boost after the Labour party outlined a plan to prevent a hard Brexit by calling for a vote of no confidence in the government as soon as parliament returns from its summer recess on 3^rdSeptember;