From time to time, markets become obsessed. Right now, the only news that’s driving markets up and down is news on what’s happening regarding both the European banks and the state of European Sovereign debt.
The market goes through periods of time when the news flow is laser focused on issues that become magnified beyond their true importance. If Greece defaults on its bonds, does that really effect in any major way most US companies, or companies serving the ever growing consumer in China? I think not. Yet- it effects the market in a dramatic way each and every day – this month.
Fortunately, next month the focus will be earnings, and hopefully the out of Europe will have quieter voice in October- the month that has traditionally been the Bear Killer.
Today, the ECB moved to remove doubts about the ability of European banks to borrow dollars by providing new lines of credit for longer periods of time.
Markets globally were up strong on the news.
There isn’t a big news flow out of China, but here’s some items I picked up on:
- The Chinese markets were down slightly in overnight trading- the Shanghai A shares were down .2%, and the B shares down .12%. The news out of Europe should help these stocks perform better in tonight’s trading.
- Premier Wen Jiabo is using the European crisis to lobby for trade changes. The European Union has classified China as a “non market” economy- meaning they pursue unfair trade practices. In a speech, Wen “suggested” China would be more amenable to helping with the a European bail out if Europe would re designate China as a “market economy”, thereby allowing China to export to Europe without tariffs. European markets liked the idea, and rebounded on his comments.
- A study recently released by KPMG suggests China is losing its edge as the world’s greatest manufacturer. According to the report, the minimum wage in China is now 4 times that of other South East Asia countries. Indonesia and Bangladesh are benefiting from this trend. Rising wages in China is a positive with the inflation picture, and a reason China will accelerate to have its GDP growth more domestically focused.
- Baidu owns travel site Qunar.com. It was announced today Baidu plans to spin out Qunar into a separate division for an US IPO next year.
That’s it for today. Let’s hope for smoother sailing ahead.