By Lucy O’Carroll and Paul Diggle, Investment Solutions, Aberdeen
Global bond yields have backed up in recent weeks, with a recovery in oil prices partly to blame. There is scope for continued volatility in bond and other asset markets in the months ahead as they respond to potentially conflicting growth and inflation signals. On the one hand, manufacturing indicators in a number of countries have weakened in recent months: the global manufacturing purchasing managers’ index (PMI) has slowed to just 51, indicating positive but sluggish activity. World trade also slowed sharply in the year to Q1, expanding by an estimated 2.4 per cent — its weakest pace in two years. This looks to be linked to China, whose manufacturing imports dropped sharply on the quarter. On the other hand, these concerns should be partly transitory, given Chinese stimulus measures, the one-off influence of a disappointing US Q1 GDP performance and the fact that services PMIs for the main economies suggest healthy growth.