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Is It Slowing China Or Grexit That Is Driving Financial Market Price Changes?
Submitted by Bryce Coward via Gavekal Capital blog,
While some of the post Greferendum moves in financial markets could have been and were predicted by the financial punditry – lower euro, lower stocks, lower US bond yields, higher gold – the real moves have appeared elsewhere.
Indeed, as of this writing the euro is only lower against the USD by less than .5%, the MSCI World Index is barely off by 1%, bonds are bid, but not emphatically, and gold is only marginally higher.
The real moves have been in oil (WTI down 6.3% and Brent down 5%) and copper (down 3.9%).
While at first glance this may strike one as odd, there could be something larger at work.
Perhaps the more important catalyst for asset price changes of late is Chinese economic slowing rather than fears of Grexit?
As the charts above show, Chinese industrial output is closely related to oil and copper prices. Or said differently, oil and copper prices are closely related to Chinese economic activity and the slowing of which is having a direct impact on these growth sensitive commodities.
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Well.....having the two together doesn't really help.
CAll it a black swan ( China ) mating with the gray swan ( Greece ).
A Transracial Swan Event. Pop corn at the ready.
And Puerto Rico as a trifecta.
I could be wrong, again, but I think when $/EURO banks/CBs are involved (potential losses) we, investors, get the hammer. Doesn't seem so much as with China, at least not now but that will show up in import/export, earnings from US companies there, etc. We can't escape it but it does not register so quickly. Oil on the other hand does but oil stocks weren't punished as much %wise today.
POO over 50?
Yeah....whatever.
Wow, didn’t know chinese industrial output has crashed so much over the last few years!
It shouldn’t surprise but unlike the growth stories that didn’t add up this slowdown makes perfect sense.
It also means that their entire global investment boom has been financed with reserves and a dump of the dollar.
Next question: All those dollars ended up in banks who are now overfunded without a real return. They can’t really lend it out because it’s part of their collateral against their massive derivative bets. So will it need a derivative bust to release that money into the economy and create a inflation chock?
Silence. GDP growth is 9.5%
'Scuse me.....but I think you dropped this (-). It should go in the front of 9.5%
A good old fashioned deflation and POOF..no more Bank/problem solved.
China has burend through a hundred "Greece's" in three weeks.
You also have to look at the EPIC fall of commodities woe these last two years now.
"The China Hoover is OFF."
Interesting that US equities don't seem to mind.
That gives me some hope for a recovery going forward in the USA.
With the dollar spigot off because of Europe though I really would be investing in a good fixed income manager right now.
2008 hit and consumers stepped back (some because of no jobs) and began saving, spending no so much and still continue that pattern. I wonder if the Greece issue, getting debt such a bad rap, that it might, might, change the borrowing habits of countries (some by force of the people current awareness)? This might be a good thing overall but there is yet in a big hole and the climb out is difficult. People who had no previous interest might get much more interested if they see news of Greeks in bread/soup lines and homeless, not that I want that for anyone. Just a thought.
You do understand under the current credit fiat system that no debt means no fiat ?
None.
Its created by debt,and then extinguished by repayment.
Thats its evil cunning of the system.
- When was the last time U.S. equities minded anything...? They're immune...
- What kind of 'recovery' and what sectors of the economy that would underpin real growth, as opposed to student loans, 7-year car loans, share buybacks and nursing mills to feed a $taxpayer-funded medicare perpetual motion machine...?
No smart-ass intended -- I'm asking for real.
My grandkids are paying for this crap.....man are they pissed.
So China can manipulate their stock market but not gold and copper? Buy, buy, buy.
They don't seem to be "manipulating" their stock market very well.
Did a great job creating the bubble in the first place though.
Gold? Can't go there.
Copper? Ridiculous the USA doesn't go back to a real copper penny there is so much refined product now.
"All it takes is one trader" and suddenly another million tons will spill out onto the market.
Steel, concrete...the list is long and GROWING.
How can oil and copper prices be represntative of the price of the whole finacial market? Chinese industrial output is still growing at 6.1%, a rate most countries would kill for. The service industry is growing even faster in China.
According to who's estimate, theirs?
Shhh.....Minister of Truth is speaking. Smile and takee picture.
Six percent ECONOMIC growth.
That says to me they are using LESS oil and copper not more.
Yes...in the aggregate the numbers are big...but that number must include "economies"....meaning efficiency gains, productivity, etc.
Collapse in coal prices is what has stood out to me.
China is by far the world's largest producer...a billion plus tons a year.
The entire industry has been wiped out.
Why would I now be long oil then?
Wait a tad longer on the long position. Food for thought.
Ten cents a gallon for gasoline in Venezuela.
That sounds about right to me.
Funny to read all the folks scream about "Tesla's"....a friggin ONE HUNDRED THOUSAND DOLLAR CAR!!!
Sounds like SOMEBODY is nervous....
the true underlying fear comes from the realization that central banks are pretty much out of ammunition. Whether the catalyst for that realization comes from China or Greece or Japan or PR doesn't matter - any of those problems, with the Bernanke put still in place, would have been blips to climb the wall of worry on. That these problems are here after 7 years at 0%, who know how many trillions in funny money, record debt-fueled buybacks, etc is the real scare.
Captain, sum ting wong. Wee tu lo in trewsori. Coll Hack Few.
/sarc
The 1980s Oil Glut was a serious surplus of crude oil caused by falling demand following the 1970s Energy Crisis. The world price of oil, which had peaked in 1980 at over US$35 per barrel ($100 per barrel today), fell in 1986 from $27 to below $10 ($58 to $22 today). The glut began in the early 1980s as a result of slowed economic activity in industrial countries (due to the crises of the 1970s, especially in 1973 and 1979) and the energy conservation spurred by high fuel prices. The inflation-adjusted real 2004 dollar value of oil fell from an average of $78.2 in 1981 to an average of $26.8 per barrel in 1986.
https://en.wikipedia.org/wiki/1980s_oil_glut
In 1980 metal costs were high and interest rates were very high... and inflation was accurately reported.
Is output RMB based or unit based? Makes a difference when raw material costs are declining.
industrial activity down
global demand also down
even the once expected seasonal bounce is starting to look shaky now
All three.