Slower than expected growth in Japan? A plunge in Chinese exports? The Russian occupation of the Crimea and worries about the dismemberment of the Ukraine? The Standard & Poor’s 500 has pulled back from record highs but we’re not talking about a big plunge here. As of 2:30 p.m. New York time today the S&P 500 was down just 0.42% to 1869.
Today has turned into a class risk off day in global financial markets—largely on news that China’s exports plunged 18.1% in February. Economists surveyed by Bloomberg had expected a 7.5% increase in exports.
Is it a case of too much news from Asia? With the negatives and positives canceling each other out? Certainly the news items individually are big enough to have moved Asian markets, even global markets, more than we’ve seen in the last two days.
Russian troops, jets, and tanks withdrew to their bases in Russia from the country’s border with the Ukraine. Russian forces remain firmly in control of the Crimea, but the end of military exercises on the Ukrainian border has taken some of the fear out of global financial markets. And that has left traders with just enough bandwidth to notice negative news out of China.
It sure looks like the People’s Bank is tightening again. China’s yuan was down 0.4% against the dollar at one point yesterday. That brought the currency’s decline to almost 1% in a week. That’s a big move for the very tightly managed yuan. China’s currency doesn’t move up or down unless the country’s central bank decides to let it move.
Welcome back liquidity worries in China. Today Industrial Bank suspended mezzanine lending used by real estate developers. The move to restrict these loans is seen as an indicator of a potential tightening of all kinds of financing for the sector. The news on mezzanine lending comes on top of reports that show a drop in real estate sales
Get used to it: The trend for the next few weeks looks like lots of news but no discernable direction for the global economy or financial markets.
Disappointment over weaker than expected GDP growth in Japan for the fourth quarter was overshadowed by faster than expected lending growth in China.
Yes, Chinese stocks were up again last night with the Shanghai Composite Index adding a gain of 0.8% to finish the week up 3.5%. That’s the biggest weekly advance in five months. But bad loans at Chinese banks rose for a ninth straight quarter to the highest level since the 2008 financial crisis
What’s ahead, sell off or panic? After today’s action I think we can take “buy on the dip” off the list of alternatives.
