Spreadex Market Update
‘Turnaround Tuesday’ continues despite news that China will refrain from market intervention
Interestingly, the markets are resisting the temptation to trickle lower, despite reports coming out suggesting that the Chinese government will no longer intervene in its own freefalling indices. It appears that the Asian session’s latest $24 billion cash injection is to be its last , for now at least, as Chinese policymakers try and decide what to do next.
Perhaps this move is wise, however; each decision made by the Chinese government intended to provide a lifeboat for the markets has been greeted with the intensification of investors’ fears that policymakers are panicking, meaning that latest $25 billion disappeared into the loss-filled ether like the rest of the attempts at aid. China’s new ‘leave it alone’ policy may end up being more effective at righting the market-ship than the ‘see what sticks’ methodology of the past few weeks.
Things are looking much healthier on the European markets this morning; the FTSE is back above 6000, the DAX is approaching 10000 and the CAC is steady at 4500. The German index received an extra boost in a better-than-expected Ifo business climate figure, its best since May. The FTSE, meanwhile, is benefiting from the robust rebound currently underway in the oil and mining sectors, with only Lonmin lagging behind its commodities colleagues.
The US open should provide a bit more joy, with the Dow futures pointing to the index recovering the 16000 level it abandoned yesterday afternoon. The US indices were helped yesterday evening by a slightly more dovish Dennis Lockhart; the Atlanta Fed President told Bloomberg he was ‘going to stick with later this year’ in regards to the date of a rate hike, but wouldn’t reaffirm his beyond-hawkish declaration from earlier in the month that a September lift-off was all but guaranteed. The whole interest rate issue could regain focus this afternoon, with the flash services PMI, CB consumer confidence and new home sales to come. Investors are likely to still be a bit too sore to fully give the data their attention, but it will be an interesting test of Lockhart’s pro-2015 lift-off comments nevertheless.
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