Judging by the drop in market volumes and deal activity, investors have enjoyed their summer break. Yet the warning lights flickering across global markets mean that any holiday glow will fade quickly. The divergence between a record-setting Wall Street and the negative returns from China, Europe and many embattled emerging market countries should worry even the most ardent of US equity bulls. Isolation is never perfect in a globalised financial system, particularly when central banks, led by the US Federal Reserve, are unwinding their financial crisis-era stimulus. Wall Street has cast aside trepidation over trade spats and November’s congressional midterm elections and propelled the equity market into uncharted territory, buoyed by robust earnings and solid economic data. In contrast, many other markets loiter well below highs established earlier in the year, when faith in a synchronised global recovery was paramount. Standing out from this list for all the wrong reasons are Chine...

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