Over the same period Brent oil has risen from a low of US$104 to a recent high of US$125 on growing concern over Iran’s developing nuclear capability, Israel’s ‘distinct sharpening of tone’ towards Iran and the divergence between its own position and that of the Obama Administration on where it sees the ‘red line’ – the point at which the US and Israel agree that Iran’s actions require a military response.
China’s downgrading of its GDP target for this year might have bothered the markets but the authorities intention to move the economy onto to a more sustainable growth path has been known for some while now. Last year the government set the target growth rate for the current 5-year plan at an average of 7 percent so the lowering of this year’s target to 7.5 percent (from 8 percent) is arguably consistent with the medium term ambition. That said, China has a record of consistently outperforming its growth targets and this year is likely to be no exception.
Getting through this week, which culminates with more economic news on Friday from China (including figures for inflation, retail sales and industrial output) as well as the US Non-farm payrolls (markets expect 218,000 private sector jobs) will be something of a hurdle. Hopefully, this week’s reaction in equity markets will prove to be no more than a brief and limited ‘technical’ shake-out.