Chinese Equities Record Second Largest Fall This Month

January 26, 2016

The Shanghai Composite index plunged 6.4% to a 13-month low and is now down almost 50% since last June.  Although the yuan is unchanged on the day, there’s much concern that it will devalue considerably further given the very high pace of Chinese capital outflows.

In other equity market action around the Pacific Rim, stocks fell 2.9% in Hong Kong, 2.4% (or 402 points) in Japan’s Nikkei-225 index, 1.4% in Singapore, 1.2% in South Korea, 0.8% in Taiwan and 0.6% in New Zealand.

Australian markets were closed for Australia Day.

Stocks in Europe have so far lost 1.3% in Greece, 0.7% in the U.K., 0.6% in France, 0.5% in Germany, 0.4% in Switzerland and 0.3% in Spain.

After yesterday’s substantial relapse, West Texas Intermediate oil edged up 0.1% to $30.44 per barrel.  Comex gold is 0.4% stronger at $1,112.53 per troy ounce.

Ten-year sovereign debt yields reflect risk aversion, with drops of two basis points in both British gilts and German bunds and a 1-basis point downtick in Japanese JGBs.  The 10-year Treasury futures dipped back under 2.00%.

The dollar is unchanged against both the yen and loonie, up 0.3% versus the Swiss franc, 0.2% relative to the euro and 0.1% vis-a-vis sterling, but down 0.4% and 0.3% against the Australian and New Zealand currencies.

Markets await the release of a number of U.S. economic statistics later today, including the monthly FHFA and Case-Shiller home price indices, the Conference Boards consumer confidence index, the composite and service sector purchasing manager indices that Markit Economics compiles, the Richmond Fed manufacturing index and weekly chain store sales.  Yesterday’s report of the Dallas Fed manufacturing index showed a swoon to -34.6 in January from -21.6 in December and -4.9 in November.

ECB President Draghi presented a speech in Germany defending the asset purchases that are meant to lift inflation back to target.

Bank of England Governor Carney testified in parliament that he will announce by yearend if he wishes to serve beyond the current term and again asserting that a hike in the central bank’s interest rate now would still be premature.

New Zealand’s service-sector purchasing managers index ended 2015 at a level of 58.9, its third best score of the year but down from 59.8 in November.

Japanese corporate service prices ticked up 0.1% on month in December and recorded a 0.4% 12-month rate of increase for the third time in four months.

South Korean real GDP advanced 0.6% last quarter and by 3.0% compared to the final quarter of 2014.  Economic growth in 2015 averaged 2.6%, down from 3.3% in 2014.

Polish GDP grew 3.6% on average last year after a 3.3% advance in 2014.  But the Polish jobless rate ended the year at 9.8%.

Industrial production in Singapore fell 7.9% between December 2014 and December 2015.

The Filipino trade deficit of $970 million in November was only half as large as that in October.  Thailand recorded a trade surplus of $11.72 billion last year, its first surplus since 2010 after a $225 million deficit in 2014.  Hong Kong posted a HKD 45.7 billion trade deficit last month, up from a HKD 33.1 billion shortfall in November.  That brought the full-2015 deficit to HKD 441 billion.  Between 2014 and 2015, Hong Kong exports and imports fell by 5.8% and 11.0%.

The Swiss trade surplus widened 23% last year to CHF 36.6 billion as exports and imports slid 0.7% and 0.5%.

Swedish producer prices declined 1.9% between end-2014 and end-2015.  The PPI dropped on month in December for a fourth straight time.

South Africa’s index of leading economic indicators edged 0.1 point higher in November but posted a 5.0% on-year decline.

Hungary will be announcing its latest central bank interest rate decision later today.

The Fed’s FOMC begins a two-day policy meeting today.  No press conference is scheduled after tomorrow’s policy decision.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

Tags: , , ,


Comments are closed.