Salient to Investors:

Global growth is changing but we are not on the verge of a global recession. UK and US growth is solid, and the Eurozone is staging a weak recovery.

China’s stock market drop says little about the health of the Chinese economy and matters little to investors outside China, because foreign ownership is very limited, and to Chinese investors, who are a tiny subset of the Chinese people.

Independent analysts estimate China GDP at closer to 5%, still a healthy rate of growth for an economy which is now much bigger. If growth is 5%, then global growth is not in danger. If it is 3% or lower then the markets will fall more.

China is wise to partially uncouple the renminbi from a rising dollar because the dollar is likely to continue rising and other Asian currencies are weak. Chinese manufacturing data last week was poor but other data, especially consumption, is healthier.

The lowest commodity prices since 1999 are either signalling a slowdown in growth or increase in supplies. Lower fuel and food prices boost real household disposable incomes. Low commodity prices are an almost unambiguously good thing for the developed world, but not for the emerging world.

Saudi Arabia’s attempt to drive higher-cost US shale producers out of the market by keeping its production high has failed.

US shale production was powered by high oil prices, no longer an engine, and easy credit, still an engine.

Supporting stock prices is not a Fed responsibility, so to delay hiking rates in September may damage its credibility and make the eventual task harder.

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