Spreadex Market Update
Calming words from PBOC have short shelf-live as European gains dissipate
It looks like the calming words of PBOC chief Zhou Xiaochuan had a fairly short shelf-life; after the dust settled on the open, and the realisation that, despite what the central bank governor said, the Shanghai Composite still fell by 2.5%, investors were all of a sudden not as willing to lift the European indices as they were at the start of the day. The revelation this morning that August saw the biggest fall in China’s foreign currency reserves on record didn’t help, as $93 billion of the country’s (admittedly enormous) $3.56 trillion stash was eaten up as Beijing attempted to prop up the yuan (something, incidentally, that is unlikely to end any time soon).
So with China still looking shaky as ever, the dribble of data from Europe would have hardly warmed investors to the region either. Germany’s industrial production was lower than expected, at 0.7% against the 1.2% forecast, and follows the country’s dismal factory orders figure last week. The Eurozone’s Sentix investor confidence index, meanwhile, fell to an unsurprising 7 month low, as the double-whammy of Greek instability and price-eroding Chinese fears weighed on traders’ appetite for risk.
Things likely won’t be helped by the absence of US trading this afternoon. For whilst the US open has just as often intensified the myriad of recent morning sell-offs as it has caused a widening of afternoon gains, the European indices would stand more chance of a strong close to the day with an injection of life from the American session than without.
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