U.S. stock index futures are higher this morning even though China and the EU markets are lower. The Shanghai Composite Index fell 1.3% to 2,927.29 at the close, despite a new $22B injection from Beijing to shore up growth. Oil has edged higher, but isn't expected to hold recent gains.
Today's markets are expected to follow the action in China again, but there will also be plenty of speculation about the Fed and when it might raise rates. Volatility will be the watch word for today as we expect the averages to sea-saw and edged further down by the close.
Here is the current market situation from CNN Money
European markets are mixed today. The DAX is up 0.24% while the FTSE 100 gains 0.22%. The CAC 40 is off 1.66%.
Following the most recent Chinese market rout, Deutsche's Jim Reid updates a chart he used back in early June comparing the Shanghai Composite recent performance with that of the NASDAQ back in 1999-2000. This is what he says:
The ascent was very similar back in June and now the decline is pretty much on exactly the same path. So the NASDAQ '99-00 has almost been like having a stock almanac for the recent Chinese experience. It reminds me of Back to the future II where Biff steals the time machine to take a sports almanac back to his younger self in order to make millions betting on these events. A great film. Although having only watched it recently again, I was amused to note it largely takes place in 2015 and everyone has flying cars. So perhaps the pace of technical change is not as great as was anticipated back in the eighties!
True, but BTTFII never anticipated the massive economic impact of "eyeballs" on technological progress. Anyway, here is the chart. If past is indeed prologue, now may be a good time to buy some Shanghai Composite calls, especially with China's desperation getting more profound with each passing day.
(Reuters) - Oilfield services company Schlumberger Ltd agreed to buy Cameron International Corp , which makes equipment used by oilfield services providers, in a deal valued at $14.8 billion to cut costs amid weak drilling activity.
LONDON (Reuters) - World shares sagged on Wednesday as investors feared fresh rate cuts in China may not be enough to stabilize its slowing economy or halt a stocks collapse that is wreaking havoc in global markets.
On August 11, China devalued its currency, and in the subsequent 3 days the onshore Yuan, the CNY, tumbled by some 4% against the dollar. Then, as if by magic, the CNY stabilized when China started intervening massively, only this time not through the fixing, but in the actual FX market.
This means that while China has previously been dumping reserves as a matter of FX policy, after August 11 it was intervening directly in the FX market, with the intervention said to really pick up after the FOMC Minutes on August 19, the same day the market finally topped out, and has tumbled into a correction since then. The result was the same: massive FX reserve liquidations to defend the currency one way or the other.
And yet something curious emerges when comparing the traditionally tight, and inverse, relationship between the S&P and the Treausry long-end: the drop in yields has not been anywhere near as profound as the tumble in stocks. In fact, the 30 Year is wider now than where it was the day China announced the Yuan devaluation.
Why is that?
We hinted at the answer on two occasions earlier (here and here) and yet the point is so critical, and was missed by virtually all readers, that it deserves to be repeated once again: as part of China's devaluation and subsequent attempts to contain said devaluation, it has been purging foreign reserves at an epic pace. Said otherwise, China h ...
LONDON (Reuters) - Oil stabilized on Wednesday after China's central bank moved to support the country's economy, but prices stayed near 6-1/2-year lows as a heavy supply glut kept the market outlook bearish.
-- this post authored by Joseph Tracy, Robert Rich, Samuel Kapon, and Ellen Fu
Indicators of labor market slack enable economists to judge pressures on wages and prices. Direct measures of slack, however, are not available and must be constructed. Here, we build on our previous work using the employment-to-population (E/P) ratio and develop an updated measure of labor market slack based on the behavior of labor compensation. Our measure indicates that roughly 90 percent of the labor gap that opened up following the recession has been closed.
It seemed like finally China's relentless and increasingly futile attempts to have a green stock close would work: interest rate cuts, liquidity injections, direct stock interventions, even threats on the Prime Minister's head, and just to make certain moments before the close news very deliberately broke that government funds are buying large financial stocks, especially state-owned banks, to support the index, in the latest clear signs of government support, the Shanghai Composite seemed on pace to end an unprecedented series of consecutive tumbles which have dragged the composite down nearly 1000 points, or 25% in one week, and then... red close, with the SHCOMP down 1.3% to 2927, and a stunned China watching in horror as the central bank and government lose control, and everything they throws at the biggest market bubble of 2015 does absolutely nothing.
Well, not nothing: what was a 60% stock market gain for the year on June 12 has turned into a -8% rout two months later.
Here are the cliff notes: the Shanghai Composite today has been up 1%, down 3.5%, up 4%, down 1.5% and closed down 1.3%. As Bloomberg's Richard Breslow noted, the composite is the poster child for and magnified image of how all sorts of assets have moved.
"The PBOC has serially announced aggressive and long-lasting market support measures, a cessation of support measures pending further study, a devaluation with murky explanation, a belated rate cut, followed up with ''the recent interest rate and reserve requirement ratio cuts don't represent a shift in China's prudent monetary policy.'' It isn't just about a bubble being burst."
BEIJING (Reuters) - Toyota Motor Corp plans to "gradually" restart from Thursday its manufacturing operations near the Chinese port of Tianjin, which has been halted after the deadly chemical explosions on Aug. 12, the company said on Wednesday.
BERLIN (Reuters) - Germany's biggest utility E.ON aims to aggressively expand its solar business and is banking on the United States where President Barack Obama has pledged to promote renewables in a bid to fight climate change.
The world watched as global stock markets went haywire on what is now being called "Black Monday." No major markets around the world went unscathed, with many markets taking their worst hits since the Global Financial Crisis.
I believe I have the most accurate diagnosis for America (Diagnosis for America (Version 3)) as well as the best solution (Solution for America (Version 3)). To best appreciate them, you must have an in-depth understanding of both democracy and America. Let's begin with Alexis de Tocqueville.
Econintersect wants your comments,
data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.
Econintersect Live Market
Print this page or create a PDF file of this page
The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.
Take a look at what is going on inside of Econintersect.com