A big week for China news hasn’t started off well. And that says, “Watch out!” when U.S. stocks resume trading on Tuesday, September 8. Today’s news showed that China’s huge foreign exchange reserves got a bit less huge in August. China’s foreign-exchange reserves fell by a record $94 billion last month
Even at their most optimistic today, U.S. markets weren’t totally convinced that Shanghai and Shenzhen wouldn’t do something “nutty” when they open tomorrow (tonight New York time.) Apparently at the end of trading today New York investors decided that the risk of a negative Chinese reaction was just too great and they sold “just in case.”
U.S. stocks opened hugely lower with the Dow Jones Industrial Average plunging 1000 points at the open for a 6.6% loss and the Standard & Poor’s 500 tumbling to a 5.3% decline. But then U.S. stocks rallied into midday and held on to much of those gains in the early afternoon so that at 2:30 p.m. New York time the Dow was “only” off by 363.5 points (2.21%) and the Standard & Poor’s was down “only 2.64%.
So much for calm. Today, August 18, volatility returned with a vengeance led by a plunge in China’s mainland stock markets. The Shanghai Composite Index dropped 6.15% overnight.
Think there’s a connection here? New car sales in China fell in June for the first time in more than two years. And last week the Communist Party’s Politburo pledged policy changes in the second half of 2015 to accelerate growth. The proposals are heavy on the tried and true of infrastructure spending and big increase in the funds available for debt financing.
To me the People’s Bank has misread what the markets were afraid of. The markets weren’t afraid that the Chinese government wouldn’t pull out its usual bag of tricks to prop up stock prices. Instead financial markets were afraid that the usual tricks wouldn’t work. And those fears haven’t been removed by the July 15 report of 7% economic growth
The default today, April 20, of Chinese real estate company Kaisa Group Holdings, the first ever in China’s real estate sector, is a big deal for two reasons.
China’s GDP grew by 7% year over year in the first quarter of 2015, the National Bureau of Statistics said on Wednesday, April 15. That’s the weakest quarterly rate of growth since the first quarter of 2009
Today’s news on Chinese exports is a very negative set up for Wednesday’s release of data on first quarter GDP. Exports fell 15% in March
