The Chinese economy still appears to be stuttering, prompting the PBoC to unveil the most wide-ranging set of stimulus policies since 2015 to stave off a collapse in growth. Cuts in the reserve ratio, reverse repos, loans now 100% covered for excess inventory purchase, a cut in  mortgage rates  and deposit levels for second home buyers (now 15%) are all intended to give a defibrillatory jolt to their moribund economy. They also introduced a scheme allowing funds to borrow from the central bank to support the stock market (they have tried this before).

In the US Kamala Harris does appear to be making some headway against Donald Trump causing his utterances to become even more random. More considered was a 50bp cut (apparently a hawkish one for some members of the FOMC) by the Federal Reserve, kicking off their easing cycle, which they managed to achieve without unsettling markets, no mean feat in the midst of accusations of being behind the curve. Their stock markets duly rallied to new all-time highs despite a tempering of the Magnificent 7 influence and the Vix dropped to normal levels.

In contrast Europe is still experiencing difficulties in its two largest economies. Recent German and French PMI’s were weak and contractionary, especially in manufacturing, and Eurozone PMI’s as a whole are also weak as the boom in the periphery moderates. The ECB delivered another 25bp cut but the Eurostoxx has traded sideways for the last six months.

UK plc remains regarded as a better option (at this time) for outside investment and the new government might have realised that trying to talk us into a downturn is not such a good idea. Their plans must entail more borrowing but with debt to GDP hovering at around 100% there is not much room for large scale borrowing. The Bank of England stayed on hold with a decisive 8-1 vote.

A flurry of Sterling issues ended the summer drought. Whilst there have been several quality names coming to market there seems to be a concerted effort by syndicates to squeeze the last drop of new issue premium out of most deals leading to investors being tougher on limits and consequently some final books have been slim. Spreads widened a touch and then tightened remaining well supported.
 

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