Dismaland

Bristol street artist Banksy has recently opened the Dismaland Bemusement Park in the derelict former Tropicana lido in Weston-Super-Mare. The exhibition, which is a dark take on theme parks includes a dilapidated fairy castle and a boat pond where all the boats are filled with models of migrants. Banksy’s popularity shows no sign of waning with visitors queuing in the pouring rain for up to 4 hours while the ticket website initially crashed due to the level of demand. The local tourist industry has welcomed the exhibition which will boost the local economy in late holiday season. Hopefully, this will be an inspiration to the local council as the site has been derelict for 15-years.

Which got us thinking. Dismaland could well describe many countries currently. China has impressive, high status buildings such as the Olympic Bird’s Nest stadium yet the stock market and economic data look pretty dismal. Likewise, not many years ago Greece hosted the Olympic Games, yet the once gleaming venues now lie abandoned. Brazil built numerous stadia for the Football World Cup and is building more for the 2016 Olympics but there have been numerous street protests and riots over the cost at a time when the economy is suffering.

There are many emerging market countries which, like the derelict Tropicana lido in Weston –Super-Mare, could do with an unexpected helping ‘shot in the arm’. Many investors globally, are no doubt feeling dismal and bemused by recent stock market turmoil. As many smaller Chinese investors are just discovering, stock markets can sometimes be like a roller coaster ride and not always fun.

What have we been watching?

UK investors returned to the office last week after a long, wet bank holiday weekend only to see yet another global sell-off with China continuing to get most of the blame. Its official manufacturing data fell to a three year low and there was sign of contagion in data released by some of its Asian trading partners. However, manufacturing data across a number of the world’s key economies does not appear to be really gaining any traction, despite central bank liquidity support as demand falters in several regions. The fact that the Chinese equity market closed for a few days due to 70th V-day celebrations subsequently helped other global markets.

The pounds post-election euphoria appears to have unravelled. Hitting a 4-month low against the US Dollar and last week suffered its fifth weekly loss against the euro, its longest stretch of declines since September 2012.

In Europe, the ECB lowered its forecasts for inflation and economic growth in the Eurozone due to a slowdown in emerging markets and weaker oil prices. The growth forecast for 2016 has been reduced from 1.9% to 1.7% and inflation cut to 1.1%.

In the USA, manufacturing growth slowed in August to its weakest level in over two years. The last job numbers before the Federal Reserve’s September meeting proved inconclusive. On the one hand the number of new workers slightly missed expectations, however, the unemployment rate was better than forecast. In isolation unlikely enough to justify a September rate rise, particularly given the seasonal issues that tend to impact the August numbers.

Canada contracted slightly in Q2 indicating that it had moved into recession in the first half of 2015 primarily due to the weakness in oil prices.

After last week’s 25% bounce, oil drifted slightly lower on softer Chinese economic data. In addition, Iran’s oil minister suggested that Iranian oil output would be increased by 500,000 barrels a day once sanctions are removed.

In China, events took another twist with the authorities arresting or investigating several employees of brokerages and listed companies to tackle malpractice, manipulation and ‘rumour-mongering’. This is likely to further alienate foreign investors in China.

We have said before that ‘times they are a changin’. China has marked the 70th V-Day anniversary with a massive military parade. Reportedly it included the DF-21D ‘carrier-killer’ missile which some analysts suggest threaten to consign aircraft carriers, which form the basis of US naval strategy in the South China Sea to the dustbin. It’s apparently just not financial markets that China is affecting these days.

Finally, we mentioned some time ago the increasing likelihood of another El Nino weather effect. It now appears that this could be the strongest since 1997-98. Not only did Britain get battered by strong storms but global production of numerous soft commodities was adversely impacted. In Asia, lower than average rainfall is already raising concern about the sugar crop in India while a prolonged drought in Thailand has hit rice production. Oh dear! Besides ‘Dismaland’ it sounds like dismal global weather as well!

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Dismaland

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