Snapshot - Strategy & economics

Janet Mui: weekly economic update 9 August

The weakening yuan triggered a wave of fear in markets, pushing down bond yields. In the UK, the economy shrank in the second quarter – the first contraction for more than six years.

09/08/2019

Janet Mui

Janet Mui

Global Economist

  • The significant trend of the week was the depreciation of the Chinese yuan, spooking global equity markets and sparking fears of a currency war.
  • Bond yields fell, with yields on ten-year German bunds falling to –0.6%.
  • Central banks in a number of countries, including New Zealand, cut interest rates.
  • The UK economy contracted in the second quarter, as the stockpiling activity in the first quarter (when Brexit was anticipated to occur at the end of March) was unwound.
  • This was the first quarter of negative growth since 2012 and took markets by surprise, with sterling falling.
  • We think the UK may be able to avoid recession, however, in part because of increased Government spending. But given the uncertainty around Brexit we remain cautious on the UK.

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