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Investment market update

Early Trading

UK equities are expected to open lower this morning, as traders continue to worry about economic data out of China.

World Markets

Asian stocks showed no sign of shaking off last month’s volatility, falling as a gauge of Chinese manufacturing dropped to a three-year low. Chinese shares fell 2% (as at 7.00am in London) as concern grew that government intervention will fail. The yen and euro rallied with gold, while oil pulled back after entering a bull market.

US stocks declined, with the Standard & Poor’s 500 Index posting its worst month in more than three years, as investors harboured concerns about slowing global growth and the impact of a potential interest-rate increase by the Federal Reserve as soon as September. Yahoo! Inc. and Facebook Inc. fell more than 1.7% to drag technology shares lower.

UK stocks closed 0.9% higher on Friday, while European stocks fell marginally on Monday. BG Group Plc and Royal Dutch Shell Plc climbed strongly, while UK miners reached their biggest two-day gain in two years after reaching its lowest level since 2009 earlier in the week. Tesco Plc fell 1.5% after a report that Carlyle Group LP dropped a bid for the grocer’s South Korean unit.

Headlines

Oil’s biggest three-day rally in 25 years stalled before US government data that is forecast to show crude stockpiles expanded in the world’s largest oil consumer. Futures dropped as much as 4% in New York after surging 27% in the three days through to Monday, the most since August 1990.  Crude advanced in August to post the first monthly gain since May as concerns eased over a slowdown in the US and amid signs the global glut may diminish.

China’s official factory gauge fell to the lowest reading in three years as monetary easing failed to revive old growth drivers weighed by overcapacity and sliding prices. The official Purchasing Managers’ Index was 49.7 for August, matching the median estimate from analysts and down from 50 in July. Numbers below 50 indicate contraction, with small, medium and large enterprises all below that level last month.

Australia left interest rates unchanged Tuesday, as a declining currency cushions the impact of lower commodity prices and a weaker outlook for key trading partner China. Reserve Bank of Australia Governor Glenn Stevens and his board kept the cash rate at a record-low 2%, as predicted by markets and economists following reductions in May and February.

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