The World Bank cutting its global growth forecast and data showing another monthly slide in Chinese exports has put markets on the defensive. The FTSE 100 was trading just shy of break-even, boosted by well-received quarterly sales from Sainsbury’s. Losses were heavier on equity benchmarks in the continent where banks were seeing some of the biggest declines.

The World Bank slashed its growth estimate to 2.4% for this year, down from 2.9%. It expects oil- exporting developing nations to be impaired by lower energy prices whilst growth in the US and the UK is expected to increase at a modest 2%.

The World Bank’s forecast is at odds with stock market performance. Emerging markets have seen some of the best percentage returns since global stocks bottomed this year. The MSCI Emerging Markets index is up 22% from its 52-week low reached in January. The World Bank forecasts have dampened sentiment short-term but economic growth in developing nations is not the major determinant of stock market returns right now, its monetary policy.

The modest gains in equities match the action in oil markets which have responded positively to a drawdown in weekly oil inventories of 3.56m according to the API.

The British pound rose on Tuesday after data showed much stronger than expected UK industrial and manufacturing production in April. UK manufacturing output rose by 2.3% against expectations of no change. The much vaunted Brexit slowdown is looking more like a Brexceleration.

Shares of Sainsbury’s leaped on the open before paring gains after the supermarket reported quarterly sales results. Like-for-like sales fell 0.8% in the three months to June 4. The confident tone struck by chief exec Mike Coupe has investors on board with a strategy of lower regular pricing, less promotions and the deal to buy Argos. The strategy of less price promotions is unproven. Discounters are always going to win on pure price and it could be argued the woeful performance of supermarket rival Asda in recent quarters is, in part, because of less promotions and price cuts that still don’t match Aldi and Lidl.

US stocks look set to pullback from multi-month highs with a lower open after China data and World Bank forecasts tempered optimism. 

USA pre-opening levels

S&P 500: 2 points lower at 2,110

Dow Jones: 5 points lower at 17,933

Nasdaq 100: 3 points lower at 4,510

 

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