Wednesday 26 August 2015

Financial meltdown - Day Three - 08.25/2015

Yesterday the Sydney Morning Herald was crowing. "What crisis?" they asked. The Sydney market was up and the gung-go Aussies were busy buying up bargains. \

The headline was -


This morning on a quick perusal I couldn't find anything on the subject. Go back to sleep.

This morning, turning on the radio the Radio NZ news was all about a rise in the market although a voice of caution about China's economy was added.

ASX rallies as bargain hunters jump in

RT (which is often up to the minute in its reporting) had this as its headline

Global stocks surge as China cuts interest rates


To which, Radio NZ chimed in - 


New Zealand deputy -PM and Minister of Finance (and pickpocket) Bill English thought it was all " a bit concerning" although everything is fine with the Chinese economy and there's an excuse for everything.

It's odd, I thought, that all the free market people are, all of a sudden, in favour of interventionism, especially by the Chinese. Go figure.



However, as I was taking all this in the trading day on Wall Street was ending with a surprise.

Dow Plunges Back Below 16,000 - Dead Cat Bounce Dying


"Off The Highs" - hope is fading fast as The Dow is now down over 350 points from its pre-open highs after the China rate cut and has broken back below the crucial 16,000 level...


Charts: Bloomberg


From the Guardian

US stock market gains wiped out to close second volatile day on Wall Street
Dow Jones ends day with big losses after initially appearing to bounce back from ‘Black Monday’ of global sell-offs, sparked by China economy fears


New York Stock Exchange
26 August, 2015

US stock markets continued to seesaw on Tuesday following a day of global sell-offs sparked by fears that China’s economic boom is slowing.

The Dow Jones industrial average initially appeared to be bouncing back from “Black Monday” – a day when it crashed more than 1,000 points before ending the day down 586 points.

By noon the Dow was up over 300 points as European markets closed up and investors reacted positively to China’s decision to cut interest rates. But the Dow closed 205 points down, or 1.29%. The S&P 500 ended the day down 25 points, 1.34%, and the Nasdaq closed 0.39% down.

The second day of drama came after investors continued to sell in China. The benchmark Shanghai composite index closed 7.6% lower on Tuesday following an 8.5% drop on Monday. Over three days the index has fallen 22%.

European markets reversed Monday’s losses but will be closely watched on Wednesday for reaction to the US news. In the UK, the FTSE 100 ended a 10-day losing streak to end up 3%, Germany’s Dax was up 5% and in France the CAC rose 4%.

US stock prices were initially buoyed by some positive economic news. The Conference Board’s consumer confidence index, which had declined in July, rebounded in August. The index now stands at 101.5, up from 91.0. The Commerce Department said new house sales rose 5.4% in July, slightly less than expected but still indicative of recovery in the housing market. Home resales jumped to a near eight-and-a-half-year high in July.

Ken Goldstein, economist at the Conference Board, said he expected more volatility to come in the financial markets despite Tuesday’s rally. “There’s nothing particularly new here,” he said. “China’s economy is slowing, we knew that.

Somebody woke up last Thursday and headed for the exit and a stampede was on. Now they are back again,” said Goldstein. “It doesn’t say much about our financial geniuses.”

Goldstein said consumers could be affected by the stock market wobble, which could trigger a lack of confidence ahead of the all-important holiday season despite relatively good economic data on housing, jobs and manufacturing. “The more we scare the bejeezus out of the consumer, the more risk we face,” he said.
The morning rise comes after three days of falls on stock markets around the world that erased close to $3tn globally.

China’s central bank cut interest rates and eased borrowing requirements for banks amid the continuing fall. It was the fifth rate cut since November. Earlier this month China devalued its currency in a move aimed at reviving its slowing economy.

A slowdown in the world’s second-largest economy has rattled investors worldwide. The White House sought to reassure investors on Monday as the selloff continued. “There is no doubt the global economy is more interconnected that than it ever has been,” Josh Earnest, Barack Obama’s chief spokesman, said. “What I would encourage people to evaluate is the ongoing strength and resilience of the US economy.”

The People’s Bank of China said: “Currently, there are persisting downward pressures on the country’s economic growth. There has also been quite large volatility in global capital markets recently, and monetary policy tools need to be applied more flexibly.”

Gus Faucher, senior macroeconomist at PNC Financial, agreed volatility was likely to continue but the recent falls had been “overdone”. “We’ve had a six-year bull market and I’m not surprised to see a correction, but the domestic fundamentals look pretty solid,” he said.

The fall in stock markets comes as the Federal Reserve weighs its first hike in US interest rates since the recession. Paul Ashworth, chief US economist of Capital Economics, said it was too early to speculate on whether the market turmoil would delay any rise.

There are no signs of any major downturn in the US economy, economic growth in China still appears to be slowing rather than collapsing and emerging markets are not about to endure a repeat of the 1997-98 Asian crisis. The current bout of market turmoil, if it continues, might persuade the Fed to hold off on raising interest rates in September. Since that volatility doesn’t reflect any genuine economic slump, however, we wouldn’t be surprised if it proved short-lived leaving the way open for the Fed to begin raising rates at some point this year,” he wrote in a note to investors. “Even a September rate hike is still a significant possibility if the turmoil abates over the remainder of this week.”


But it's the poor that lose out - ALWAYS.


How much did the world's richest lose yesterday?

Billionaire Bill Gates, chairman and founder of Microsoft Corp. Photo / Getty Images
26 August, 2015

The world's 400 richest people lost US$124 billion amid yesterday's global share market tumble, according to Bloomberg's Billionares Index.

Monday's decline in the 400's on-paper wealth follows last week's collective fall of US$182 billion, Bloomberg reported.

Bloomberg has reported that the wealth of 24 of these individuals - including Amazon founder Jeff Bezos and Microsoft's Bill Gates - fell by more than US$1 billion each on Monday.



Source: Bloomberg

Russian markets

The Russian ruble has fallen to its lowest level since February against major currencies, dragged down by both weak oil and Chinese stocks. The ruble was trading at over 71 rubles against the US dollar and 81.78 rubles against the euro as of 09:25 GMT.
RTS -6% Gazprom -7.4% Lukoil -6.4% Novatek -5% Sberbank -7.4% VTB -6.11% $Ruble 71.28 Is@GoldmanSachs still buying? pic.twitter.com/15hda3mHLJ
Russian Market (@russian_market) 24 Š°Š²Š³ŃƒŃŃ‚Š° 2015
Equity markets in Moscow are in the red with the RTS losing 5.51 percent and the MICEX down over two percent as of 09:25 GMT.


Listen to this nonsense from RT



Latin America

Latin American stock markets mirrored the downtrend, plunging to their lowest in 22 years, according to Bloomberg. The JP Morgan Latin America Currency Index (LACI) reached its lowest level since November 1922 on Monday.

Colombia’s peso suffered its most severe drop since 2009, falling 3.3%, to a record low of 3.2 against the US dollar. It was joined by Mexico’s currency, which decreased by 0.7 percent to 17.1. The Brazilian real weakened by 1.1%, sliding to a 12 year low of 3.5.

The Ibovespa Brasil Sao Paulo Stock Exchange Index (IBOV) continued last week’s decline, sliding 3.9 % on Monday to reach its lowest level since January.



RT on the Chinese economy

The real Chinese economy has been showing signs of slowing growth. In a report published last Friday by Caixin and Markit, it became clear that manufacturing has been losing momentum. The Purchasing Managers’ Index (PMI), its key indicator, saw a fall to 47.1 from 47.8 in July. This is the lowest level since March 2009 and shows a contraction.



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