Spreadex Market Update
Lack of sustainability in US gains, and more China choppiness, weighs on European indices
Another yuan devaluation saw the currency hit a 4 year low, and continued the People’s Bank of China’s scattershot approach to providing aid for its slowing economy and erratic stock market. Meanwhile Its last move, the PBOC rate cut, was as insufficient as many expected, even if it did arguably prevent a third day of complete collapse for the Chinese markets.
The Shanghai Composite spent the morning lurching between losses and gains, a marked improvement comparative to the uninterrupted plunge of the past 2 days. Yet whilst ending down 1.3% compared to the 8.5% and 7.5% of Monday and Tuesday is progress, any session that ends in an 8 month low is still going to sting, and the lack of consistency during the session’s trading suggests that investors are continuing to clutch at straws.
Of course all of this spelt bad news for the European indices. Signs from the US that investors weren’t confident enough to carry a recovery through to the end of the American session has taken its toll on the FTSE, DAX and CAC, with the wild scenes in China adding to the sense of unease. Given what happened in the US and China these current losses might just be a case of panicky European investors correcting the markets after an over-eager rally following the announcement of the PBOC rate cut extended the rebound into unrealistic territory. Regardless, it looks set to be a third day of stomach-churning choppiness across the board, with the UK index falling below 6000 once again, whilst the DAX gave up on the 10000 level.
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