The global share market correction continued over the last week as worries intensified regarding emerging countries, their currency rout and the impact on global growth along with the ongoing fall in commodity prices.
For the past week, US shares fell 5.8%, Eurozone shares lost 6.7%, Japanese shares fell 5.3%, Australian shares fell 2.7%, and Chinese shares lost 11.5%. Reflecting investor nervousness, oil and metal prices remained under pressure and bonds benefited from safe-haven demand. Emerging market currencies fell further and weak Chinese economic data put renewed pressure on the emerging market currencies.
From their highs earlier this year, US shares have now lost 7.5%, Japanese shares are down 7%, Australian shares are down 13%, Eurozone shares are down 14%, Asian shares have lost 20% and Chinese shares are down 32%.
United States
US economic data was consistent with okay, but hardly booming growth. Housing starts and existing home sales all rose. Markit PMI and biz survey indicate overall growth not that strong. CPI in July weaker than expected.
The US Federal Reserve backing away from a September hike. Downside risks to inflation have increased with further falls in commodity price, still-weak wages growth and China's and EMs increasing risks. Probability less than 40% of a Sept hike if EM related turmoil intensifies.
US economic data releases over the week ahead are expected to be positive. Expect further gains in home price, bounce back in new homes sales and pending home sales. Strong reading for Aug consumer confidence, upwards revision to June quarter gross domestic product growth to around 3% annualised with inflation remaining low at 1.3% year-on-year.
Eurozone
Eurozone biz conditions PMI impressed in Aug, better than expected (strong 54.1 reading): 4-year high and points to improved growth in Q3'2015.
Greece’s third bailout program now in place, the PM has called for new elections likely for 20 September to purge non-supporters of the bailout. So expect some more noise regarding Greece, but it’s unlikely to be a major threat.
Asia
Chinese economic data was contradictory, putting doubts whether the figures released by the government can be fully trusted. While property prices rose again in July and the MNI business sentiment survey rose strongly in August, the closely watched Caixin manufacturing purchasing managers’ index fell to its lowest since March 2009. The latter likely reflects the difficult conditions in small and medium businesses and the need for further monetary easing. Japanese June quarter gross domestic product contracted but growth is likely to return in the current quarter. A further improvement in the August manufacturing conditions purchasing managers’ index to 51.9 also points up.
"My comments:
Though slightly and not elaborate, I have mentioned not once but many times about China's overheated playground. If you took note, it's more or less a warning to sell and get the hell out when you still can. Investors' confidence in China will be shaken again. "
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China shares wipe out 2015 gains as stocks tumble 8.5% once again. |
Closer to home, same old story. I've been talking it over the last two weeks:
Aug 22: Alarming Figures of Malaysia's Debt Problem
Aug 16: Stuck in the Middle of Nowhere
Aug 5: The Risk of Holding Ringgit is Skyrocketing, WTB Donations
July 26: Sunday Lite: Flip Flop In Malaysia's Property Market
Aug 8 post has a section on What You Can Do with your MYR. I'm inclined to say that our financial woes will continue until we get more clarity on our 2016 Budget coming October. That's still two grueling months ahead and likely not that any good news will come out. I also heard some rumors about GST but I cannot share - later kena charge for false information :)
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| Lanun Bugis - Pirates of the Carry-BN |
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