Asian shares bounce off three-year lows while China's suffering goes on

[anon45]

Volatile global markets showed signs of a respite from the recent blood-letting on Tuesday, as bargain hunters helped Asian stocks off three-year lows hit on fears that China's economy was risking a hard landing, with Chinese shares losing another 5 percent.

The MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS jumped 1.7 percent after an initial dip to three-year lows while Japan's Nikkei .N225 index also erased most of its early losses after an initial drop of 4.3 percent.

"There appears to be buyback as many markets look oversold after panicky selling in the last few days. Even the shares that had little business ties with China were sold," said Yukino Yamada, senior strategist at Daiwa Securities.

U.S. stock futures ESc1 also gained 2.0 percent in Asia, paring a part of its 5-percent fall the previous day.

But mainland Chinese shares bucked the trend, with Shanghai Composite Index .SSECfalling another five percent even after 15 percent fall in the last three days, including 8.5 percent drop on Monday.

"Global investors are cannibalizing each other. Calling it a market disaster is not an overstatement," said Zhou Lin, an analyst at Huatai Securities.

"The mood of panic is dominating the market ... And I don't see any signs of meaningful government intervention."

Underlining concerns about China, Japanese Finance Minister Taro Aso said on Tuesday he hoped China would take action to stabilize its economy and that Tokyo had no plan for now to unveil its own new economic stimulus package.

MSCI's all country world index .MIWD0000PUS is up 0.2 percent in Asia after having fallen 3.8 percent on Monday to a 10 1/2-month low, its biggest fall in almost four years.

Global share markets have been hit by worries that the Chinese economy, the most important engine for the world economy, was growing at a much slower pace than Beijing's 7 percent target for 2015.

Investors are also unnerved by uncertainty over U.S. monetary policy. The Federal Reserve has said it plans to raise interest rates this year for the first time in almost a decade.

The heavy fall in share prices worldwide over the past week has sharply reduced expectations of a U.S. rate hike in September, but the outlook is far from clear.

Atlanta Fed President Dennis Lockhart, whose comments earlier this month sparked expectations of a hike in September, said on Monday that the Federal Reserve will likely begin raising rates "sometime this year."

On Wall Street, the S&P 500 Index .SPX fell 3.9 percent to a 10-month low on Monday. The CBOE volatility index .VIX, a key measure of U.S. equity volatility, shot up to more than 50 percent at one point for the first time since the 2008 global financial crisis.

Because some investors often fund their investment in risk assets by borrowing low-yielding euro and yen, the sell-off in shares helped send both currencies to seven-month highs.

The euro rose as high as $1.1715 EUR= while the yen strengthened to 116.15 to the dollarJPY=.

But both currencies stepped back in Asia. The euro slipped 0.7 percent to $1.1531 while the yen retreated to 120.02 to the dollar.

Oil prices also stabilized in Asia after having plunged more than 6 percent on Monday to 6 1/2-year lows.

U.S. crude futures CLc1 traded at $38.73 per barrel, gaining a dollar from Monday's low of $37.75.

Brent crude futures last stood at $43.20 after having fallen to $42.23 on Monday.

Brent still stood not far from $36.20, its low hit in the aftermath of the global financial crisis, having fallen more than 66 percent from last year's peak.

Asian shares bounce off three-year lows while China's suffering goes on| Reuters

 

[Agent Smith]

yes, Indian stock markets too have recovered along with Japanese NIKKEI. but the chinese economy is sinking continuously, which is worrisome.

 

[ito]

The Chinese slide will continue for more time...and the suffering could become even worse.

 

[Economic superpower]

Meanwhile the Indian Rupee is at 66.

Could hit 70 soon.

yes, Indian stock markets too have recovered along with Japanese NIKKEI. but the chinese economy is sinking continuously, which is worrisome.

Indian economy is sinking.
Japanese economy is sinking.

China, despite its economic problems, is still the best out of the bunch.

 

[TaiShang]

I feel pity for Indians, they have the wrong timing for their omnipotent emperor Modi.
They think they can survive,
Yes, 25% growth!
Indian economy can double in three years: Suresh Prabhu - The Economic Times

Indian economy is going to be the largest in 2012.

So, you are slightly behind the schedule.

 

[SrNair]

Reported.

Indian economy is going to be the largest in 2012.

So, you are slightly behind the schedule.

Offtopic.

 

[TaiShang]

Reported.

Offtopic.

Related. Refer to post #2.

Thinking a little bit deeply, in times of trouble, it is natural that people will flock to great economies like India which will become a superpower in 2012.

Is not that true @Economic superpower , @Beidou2020 ?

 

[Fireurimagination]

This is temporary recovery, if Chinese markets continue to fall all others will follow shortly

 

[liall]

Meanwhile the Indian Rupee is at 66.

Could hit 70 soon.



Indian economy is sinking.
Japanese economy is sinking.

China, despite its economic problems, is still the best out of the bunch.

China's stock is going to go down even more. Dont worry not downplaying China's economy but some of the stocks in China are valued way too high. The correction will continue and the millions of the margin traders are going to suffer a lot.

 

[TaiShang]

Blame the US for your problems, folks. China is just doing the necessary correction. We have singlehandedly pulled you off from the 2008 crisis. But time has come for China to put its economy on a new track. Adjust or die.

***

The Fed Is Spooking the Markets Not China
By Peter Schiff

Euro Pacific Capital

August 24, 2015


Fasten your seat belts, this ride is getting interesting. Last week the Dow Jones Industrial Average was down more than 1,000 points, notching its worst weekly performance in four years. The sell-off took the Dow Jones down more than 10% from its peak valuations, thereby constituting the first official correction in four years. One third of all S&P 500 companies are already in bear market territory, having declined more than 20% from their peaks. Scarier still, the selling intensified as the week drew to a close, with the Dow losing 530 points on Friday, after falling 350 points on Thursday. The new week is even worse, with the Dow dropping almost 1,100 points near the open today before cutting its losses significantly. However, no one should expect that this selling is over. The correction may soon morph into a full-fledged bear market if the Fed makes good on its supposed intentions to raise interest rates this year. Have no illusions, while most market observers are quick to blame the sell-off on China, this market was given life by the Fed, and the Fed is the only force that will keep it alive.

The Dow has now blown through the lows from October 2014, when fears over life without quantitative easing and zero percent interest rates had caused the markets to pull back about 5%. Back then when market fear began spreading, St. Louis Fed President James Bullard publically issued a few choice words which reassured the markets that the Fed stood ready to reignite the QE engines if the economy really needed a fresh dose of stimulus. By the end of the year the Dow had rallied 10%.

Amid last week’s carnage, Mr. Bullard was at it once again. But instead of throwing the market a much needed life preserver, he threw it an unwanted anchor. He offered that the economy was still strong enough to warrant a rate increase in September. He was careful to say, however, that the Fed is still “data dependent” and will therefore base its decision on information that will come out over the next three weeks. So after nearly seven years of zero percent interest rates, the most momentous decision the Fed has made since the Great Recession will be dictated by a few weekly data points that have yet to emerge. Haven’t seven years of data provided them enough information already? What’s next? Will they have to check the five-day forecast to insure that there will be no rain before they pull the trigger?

As I have been saying for years, the Fed has always known that the fragile economy created through stimulus might prove unable to survive even the most marginal of rate increases. But in order to instill confidence in the markets, it has pretended that it could. Wall Street has largely played along in the charade, insisting that rate increases were justified by an apparently strengthening economy and needed to restore normalcy to the financial markets.

But the recovery Wall Street had anticipated never arrived, and traders who had earlier demanded that the Fed get on with the show, have now panicked that the rate hikes are about to occur in the face of a weakening economy. As a result, we are seeing a redux of the 2013 “taper tantrum” when stocks sold off when the Fed announced that it would be winding down its QE purchases of bonds.

The question now is how much further the markets will have to fall before the Fed comes to the rescue by calling off any threatened rate increase? What else could pull the markets out of the current nose dive?

Think about where we are. Stock valuations are extremely high and earnings are falling and the economy is clearly decelerating. The steady march upward in stock prices has been enabled by a wave of cheap financing and share buybacks. There are very few reasons to currently suspect that earnings, profits, and share prices will suddenly improve organically. This market is just about the Fed. After one of the longest uninterrupted bull runs in history, bearish investors have learned the hard way that they can’t fight the Fed. So why should they now expect to win when the Fed is posturing that its about to embark on a tightening cycle?

If the Fed were to do what it pretends it wants to do (embark on a tightening campaign that brings rates to about 2.0% in 18 months), and in the process ignore the carnage on Wall Street, I believe we would see a consistent sell off in which most of the gains made since 2009 would be surrendered. After all, how much of those gains came from bona fide improvements in the economy? It was all about the twin props of Quantitative Easing and zero percent interest rates. The Fed has already removed one of the props, and it’s no accident that the markets have gained no ground whatsoever in the eight months since the QE program was officially wound down.

As the market considers a world without the second prop, a free fall could ensue. Now that we have broken through the October 2014 lows, there is very little technical support that should come in to play. A free fall in stocks could be an existential threat to an already weak economy. It should be clear the Janet Yellen-controlled Fed would not want to risk such a scenario. This is why I believe that if the sharp sell off in stocks continues, we will get a clear signal that rate hikes are off the table.

Of course, even if it does throw us that bone, the Fed will pretend that the weakness was unexpected and that it does not come from within (but is caused by external forces coming from China and Europe). Using that excuse, it will attempt to prolong the bluff that its delay is just temporary. For now at least Wall Street is happy to play along with the blame China game. This ignores the fact that China has had much bigger sell offs in recent weeks that did not lead to follow-on losses on Wall Street. I think the problems in China are the same problems confronting other emerging economies, namely the fear of a Fed tightening cycle that would weaken U.S. demand, depress commodity prices while simultaneously sucking investment capital into the United States, and away from the emerging markets, as a result of higher domestic interest rates and the strengthening dollar.

But if a temporary halt in rate hike rhetoric is not enough to stem the tide, a more definitive repudiation may be needed. Such an admission should finally open some eyes on Wall Street about the true nature of the economy and the unjustified strength of the U.S. dollar. That already may be happening. The dollar index closed at 95 on Friday…down from a high of 98 two weeks prior. On Monday, the index blew through the 93.50 support level and dropped more than 3% in just one day, down to intraday low of 92.6. Who knows where it stops now?

Gold is rallying in the face of the crisis and has moved quickly back to $1,160, up around $80 in just two weeks. The bounce in gold must be causing extreme angst on Wall Street. Just two weeks ago, amid widening conviction that gold would fall below $1,000, it was revealed that hedge funds, for the first time, held net short positions on gold. Those trades are not working out. With the major currencies and gold now strengthening against the dollar, the greenback has had some success against far lesser rivals like the Thai baht and the Kazakhstan tenge. But these victories against currencies largely tied to commodities may be the last fights the dollar wins for a while, especially if Janet Yellen finally comes clean about the Fed’s inherent dovishness. Those currencies now falling the farthest may be the biggest gainers if the Fed shelves rate increases.

Some still cling to the belief that the Fed will deliver one or two token 25 basis point rate increase before year end. But this could expose the Fed to a bigger catastrophe than doing nothing at all. If it actually raises rates, and the crisis on Wall Street intensifies, further weakening an already slowing economy, the Fed would have to quickly reverse course and cut back to zero. This would put the Fed’s cluelessness and impotency into very sharp focus. From its perspective anything is better than that. If it does nothing, and the economy continues to slow, ultimately “requiring” additional stimulus, it will at least appear that its caution was justified.

Unfortunately for the Fed, it won’t be able to get away with doing nothing for too much longer. Events may soon force it to show its hand. Then perhaps some may notice that the Fed is holding absolutely nothing and has been bluffing the entire time.

 

[SP!TF!R3]

And the reason of this turmoil???

Chinese "Shadow Banking"..

while these Chinese punks are grinning here,they doesn't know,its because mainly for China and their corruption,this new turmoil has started..because,possibly they're not allowed to know this..

it was predicted before..

Are China’s shadow banks going to bring the economy down? | Business Spectator

 

[Economic superpower]

And the reason of this turmoil???

Chinese "Shadow Banking"..

while these Chinese punks are grinning here,they doesn't know,its because mainly for China and their corruption,this new turmoil has started..because,possibly they're not allowed to know this..

it was predicted before..

Are China’s shadow banks going to bring the economy down? | Business Spectator

China's problems have alot to do with the problems in Europe, US, Japan.
Chinese economy will weaken when these economies weaken as all these economies are interconnected. The demand for Chinese manufacturing goods from the big markets are collapsing which is hurting domestic firms in China. China is importing less commodities and as a result commodity prices are collapsing as Chinese demand for commodities is collapsing.
China is the epicentre of the global supply chain which is why China is the largest manufacturer and the largest consumer of commodities. China imports commodities to produce goods and exports it to the world.
When world demand falls, Chinese manufacturing falls, thus Chinese demand for commodities falls.

Commodity-driven countries are being slaughtered as commodity prices are falling and their currencies are collapsing.

When US, Europe and China sneeze, the rest of the world gets pneumonia.

 

[TaiShang]

China's problems have alot to do with the problems in Europe, US, Japan.
Chinese economy will weaken when these economies weaken as all these economies are interconnected. The demand for Chinese manufacturing goods from the big markets are collapsing which is hurting domestic firms in China. China is importing less commodities and as a result commodity prices are collapsing as Chinese demand for commodities is collapsing.
China is the epicentre of the global supply chain which is why China is the largest manufacturer and the largest consumer of commodities. China imports commodities to produce goods and exports it to the world.
When world demand falls, Chinese manufacturing falls, thus Chinese demand for commodities falls.

Commodity-driven countries are being slaughtered as commodity prices are falling and their currencies are collapsing.

When US, Europe and China sneeze, the rest of the world gets pneumonia.

I guess the US has already caused enough havoc for world economy. This time China won't come to the rescue because it has an economy to transition.

Times of crisis are also times of opportunity.

 

[Economic superpower]

India is likely to be the largest loser in this entire saga. That explains the noise they make.

@Economic superpower




Sirs, please ban this troll that keep repeating same line of accusation and clean Indian trash from China section.

@waz , @Hu Songshan

Indians are happy laughing at China. Let's just wait when the inevitable Indian economy faces its problems and its currency problems surface. They will get it. Just remember the crap they say now.

Indians should be one of the last people that should be laughing at China considering the problems in India.

The Rupee was around 60 just a few months ago, now it's at 66. That's a 10% fall.
It will get worse as the Indian economy is currently propped up by hot money inflows. Once that reverses as it always does, watch what happens to the deficit crazy country. They are incredibly dependent on imports and as the rupee declines their problems will get worse.

Let the Indians have their fun now. Because the only time they are happy is not through their own achievements but by the misery of others.

 

[Pulsar]

yes, Indian stock markets too have recovered along with Japanese NIKKEI. but the chinese economy is sinking continuously, which is worrisome.

Whatever goes up has to come down. Gravity is hitting the Chinese bubble hard! Seems the bust is near.

According to the McKinsey Global Institute, China's debt load today is an unfathomable $28 trillion!