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Global Equities Follow China Down but not Up

Equity markets around the world dropped following sharp declines in China's Shanghai and Shenzen indexes, that, though reversed by government intervention, left investors wondering about the state of the Chinese stock markets.

The Dow was off 150 points,or 0.86 percent trading at 17,361 at 1:16 pm in New York, having been down more than 220 points earlier.

In Asia Japan's Nikkei 225 lost 1.61 percent and the Hang Seng in Hong Kong shed 1.31 percent. European exchanges kept suit with the German Dax slipping 2.14 percent, the Paris CAC 40 losing 1.75 percent and the London FTSE dropping 1.88 percent.

Crude oil and the dollar lost ground, gold was 1 percent higher to 1,127.80 at 1:30 Pm. West Texas Intermediate, the U.S crude standard traded as low as $40.51 in New York and the Bloomberg Commodity Index lost 1.08 percent, both are plumbing multi-year lows. The dollar was lower against the euro and yen, though well within the ranges of the past two weeks.  

In the United States inflation was weaker in July than anticipated. The consumer price index  registered 0.1 percent just half the forecast and well below the 0.3 percent rate in June according to the Labor Department.. The core rate, excluding food and energy was 0.1 percetn as well, less than the 0.2 percent forcast and the June pace.  On the year core CPI listed at 1.8 percent. 

The catalyst for these equity declines was the sharp swing in the mainland Chinese markets that opened the trading day. In the first part of the session in Shanghai, the Shanghai Composite index lost more than 5 percent, bringing the largest mainland exchange, at that point, to a two day toll of -11 percent.  

But late in the day a rebound engineered by government purchasing, according to several state owned companies, boosted the market, propelling shares to a 1.2 percent closing gain.

 

Joseph Trevisani

Chief Market Strategist

Chart: Bloomberg

asia aug 19

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