China panic spreads

The negative sentiment prompted by the slide in the renminbi has been compounded by further weakness in Chinese equities and another soft reading of the country’s manufacturing PMI. What’s more, falling industrial commodity prices are feeding back into growing concerns about the health of the global economy, despite the resilience of the PMIs elsewhere and the boost that cheaper oil in particular should provide to growth. Indeed, at face value the plunge in commodity prices over the last year is consistent with a global recession as severe as that in 2008-09. We think that this negativity is overdone, although the recovery in the price of gold does at least vindicate our optimism about the medium-term prospects for the precious metal.