Last week was not a good start to 2016 for global equity markets. The major negative themes of 2015 carried strongly into the New Year, with China and oil markets causing the majority of the turmoil. Last week saw two instances of the new Chinese “circuit breaker” mechanism being implemented. This means that if the market were to fall 7% within one day, trading would end early. While this policy was intended to reduce volatility, it has had the opposite effect. Some investors keen to test the effectiveness of the mechanism and others panicked by being unable to sell caused a swift 7% fall on the first trading day of the month. This turmoil in China spread throughout Asia and into Europe and US as investors once again feared for the health of the world’s second largest economy and the risk on their investments.

The oil markets continued to tumble, with a new low of below $33 being seen during the week. Surprisingly Saudi Arabia announced that it was considering an IPO of its state-run oil company, Saudi Aramco. This is widely anticipated to make the largest listed company in the world, with a suspected market value of over $1tn (Apple, the current largest listed company, has a market cap of $540bn). While an IPO would undoubtedly raise the cash needed for Saudi Arabia’s ongoing funding requirements, the timing of the potential listing is surprising, given the crude oil price is at historical lows and the current market appetite for listings and oil companies is weak.

However, there was some good news from last week. The latest US non- farm payrolls from December come in strongly at 292,000 as well as previous estimates being revised upwards. This good news was not enough to revive market sentiment for long as initial gains were quickly erased. However, it appears that the US economy continued to move forward despite global risks. It is encouraging that the outlook of higher interest rates has not damaged employers’ confidence.

Over the coming week, we will see the Bank of England interest rate decision on Wednesday and US inflation and retail sales on Thursday.