China’s exports fell by 3.1% in June from June 2012. It’s the first drop in exports since the beginning of 2012 and the biggest monthly drop since October 2009. Imports fell by 0.7% in June after dropping by 0.7% in May. Economists had expected both imports and exports to rise by 6% and 3.7%, respectively.
Now it’s the turn of the People’s Bank to put ratchet up worry in the global financial markets. The rate that’s causing all the worry is the interbank lending rate, the rate that banks charge each other. The seven-day repo rate, an interbank benchmark for funding costs, reached a record high of 12% on June 19, the highest level since 2006, and then shot up to 25%, intraday, on June 20.
Great day for financial markets in Japan—and I think, with a lag, for U.S. financial markets too. But a bad day for emerging stock markets—because of China.
Speculation that financial authorities will use next week’s Golden Week holiday, when stock markets in China are closed, to announce a new stimulus plan for the country’s financial markets does, in the short term, explain the rally today and for this week
For the day at least Chinese markets are trading on the pessimistic view continuing last week’s 4.6% drop. The Shanghai index is now down 9% for the year and prices are near 2009 lows.
Incremental moves by the People’s Bank and China’s central government haven’t been enough to to convince investors that the growth slump in the Chinese economy is about to end
I think it’s too early to call this a major change in market sentiment. After all, we’re at the end of an up week for most markets and a bit of selling before the weekend is certainly to be expected. But I’d certainly raise my warning flags a little higher up the staff
The bad news from China today has been enough to lift Chinese stocks—Hong Kong’s Hang Seng index closed up 1.1% on the news—but it hasn’t been bad/good enough to do the same for Europe. The French CAC 40 was up 0.54% today but the German DAX Index nudged into negative territory with a 0.02% drop. The Spanish IBEX 35 fell 056% and the Italian FTSE Milan Index was down 0.08%.
