REGISTER to access our GCR GLOBAL CURRENCY RESET & IRAQI DINAR FORUM; "IQD411.COM" Where we also discuss the IRANIAN ECONOMY & CURRENCY, the "RIAL"

BREAKING NEWS! To view please Register or Login.


Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
Eyes on China data, rate meetings
#1
Eyes on China data, rate meetingsLONDON BY BREAKING NEWS! To view please Register or Login.
  •  
  •  
  •  
  •  
  •  
  •  
[Image: ?m=02&d=20150904&t=2&i=1077023742&w=644&...XNPEB8310I]
An investor looks at an electronic board showing stock information at a brokerage house in Beijing, August 26, 2015.REUTERS/JASON LEE China's battered stock markets reopen on Monday after a two-day public holiday and before a monthly data dump that could reinforce fears of a hard landing, rattling the global economy.Key numbers next week include trade data on Tuesday -- expected to show both exports and imports falling again in August -- and inflation on Thursday. Signs of further weakness in the world's second-largest economy would cement expectations of fresh stimulus measures from Beijing and keep markets on edge.The International Monetary Fund warned Group of 20 finance ministers and central bankers this week that China's slowdown and rising financial market volatility, some measures of which are close to levels seen during past crises, have boosted risks to global growth. Its staff cited a mix of potential dangers such as depreciating emerging market currencies and tumbling commodity prices.The G20 is discussing those developments in Istanbul but its meeting, which ends on Saturday, is unlikely to result in specific measures to address the turmoil in Chinese markets or its impact elsewhere.Japanese Finance Minister Taro Aso said this week that a "frank debate" was needed about what is happening in the Chinese economy, including structural problems such as rising bad debts, but Beijing is not likely to be singled out for criticism.A draft communique seen by Reuters on Friday addressed last month's surprise devaluation of China's yuan currency only indirectly, committing members to move toward more market-determined exchange rate systems while refraining from competitive devaluations. It also avoided saying a U.S. rate rise would be a risk to growth, as some emerging market officials had wanted.Beijing had denied the move is the start of a round of competitive currency devaluations by governments to help exporters although officials in Washington, which has long argued for a more market-determined yuan exchange rate, greeted the shift with some scepticism.Euro zone finance ministers also meet informally in Luxembourg on Friday, while APEC finance ministers and central banks will gather in the Philippines.The market turbulence has clouded expectations for a U.S. interest rate rise later this month, the first for nearly a decade, although a lower-than-expected monthly jobs reading on Friday was largely shrugged off by markets.Nonfarm payrolls increased 173,000 last month, the smallest gain in employment in five months and well below a 220,000 forecast, but a fall in the unemployment rate and accelerating wage growth kept the prospect of a hike on the table.Federal Reserve rate-setters meet on Sept. 16-17.U.S. markets will be closed for Labor Day on Monday.Next week the Bank of England will also consider a first rate rise from crisis-era lows. Other central banks taking interest rate decisions include South Korea and the commodity-driven economies of Canada, Russia, and New Zealand.With no chance seen of a Bank of England hike on Thursday, the focus will be on the minutes of the meeting and how rate-setters who split 8-1 against a hike in August voted.Although Governor Mark Carney has said the BoE could "look through" the temporary disinflationary impact of lower Chinese demand for commodities, soft UK data has prompted markets to move back the expected timing of a rate hike to April or May.Industrial output and trade data will give an indication of how Europe's big economies are coping with the slowdown in emerging markets, which European Central Bank chief Mario Draghi blamed on Thursday for cuts to the ECB's growth and inflation forecasts.Ominously, he also warned that the projections were based on data gathered before China's stock market started to melt down.Amid fears that central banks are running out of ammunition to deal with crises after years of near-zero interest rates and monetary stimulus, a downbeat Draghi also signaled that the ECB is likely to increase its already huge asset purchase program. (Editing by Ruth Pitchford)

BREAKING NEWS! To view please Register or Login.
Content originally from http://wealthwatch.world
Reply



#2
Stop blaming China—the problem is bigger than that

BREAKING NEWS! To view please Register or Login. | BREAKING NEWS! To view please Register or Login.

Thursday, 3 Sep 2015 | 12:18 PM ETCNBC.com
910SHARES
   Everyone is blaming BREAKING NEWS! To view please Register or Login. for the recent stock-market rout, but this blame is misguided. China was the beneficiary of global expansion of money supply at the hands of activist central banks. In fact, my view is that Chinese leadership had little to do with the growth "miracle" it experienced over the last decade. [Image: 102970163-GettyImages-554991665.530x298....1441295799]Robert Postma | Getty ImagesAs central banks in the U.S., Japan and Europe eased policy, money sought a higher-yielding home in China. This capital inflow was the cause of the growth "miracle" and now that the expansionary monetary policy is ending, it is only natural that the Chinese economy would begin to slow. Unfortunately, this "search for yield" has created the largest shadow banking system the world has even seen … and it could be in trouble. According to the Bank for International Settlements (BIS), since 2010 the amount of U.S. dollar-denominated debt issued by foreign companies has grown by 50 percent from $6 trillion to $9 trillion. The proximate cause of this debt buildup was the impact of U.S. Federal Reserve quantitative easing on bond yields — as the BREAKING NEWS! To view please Register or Login.bought bonds, yields were pushed lower and investors were forced to search globally for higher-yielding financial instruments. This demand for yield fueled a credit binge of unprecedented scale.
Quote:"Unfortunately, this "search for yield" has created the largest shadow banking system the world has even seen … and it could be in trouble."-Brian Kelly

The epicenter of this pro-cyclical expansion of credit was the fast-growing emerging markets. Investors perceived that investing in countries like China, Brazil and Turkey was worth the risk, especially if emerging-market companies were offering higher yields. Some of the credit extended to emerging-market companies was used for real economic projects, but a BIS report released in late August concludes that most of the money was simply invested in higher yielding shadow-banking instruments. This is the so-called global carry trade.The global carry trade works like this: An emerging-market company issues bonds denominated in U.S. dollars; critically, the yield on these bonds is above the yield of U.S. corporate bonds but BELOW the yield on shadow-banking instruments within the emerging markets. The relatively higher yielding bonds attract investors searching for yield; at the same time, the emerging-market company can invest the proceeds of the bond sale into higher yielding instruments. The emerging-market company earns the difference between its low yielding U.S. dollar bonds and its high yield emerging-market investments. This is financial engineering by another name. The global carry trade works especially well under three conditions: 1) There is a large interest-rate differential between the U.S. and the emerging country, 2) The emerging country's currency is rising, and 3) Currency volatility is very low. All three of these conditions have been present since 2010 and have been fuel for this massive build in debt. However the economic slowdown in China coupled with the U.S. Federal Reserve ending BREAKING NEWS! To view please Register or Login.has resulted in a strong U.S. dollar (weak emerging-market currencies) and tremendous currency volatility — thereby significantly reducing the attractiveness of the carry trade.The credit expansion of the carry trade resulted in emerging-market money supply growth that was the basis for economic growth. In fact, it was the virtuous spiral of credit/money growth fueling economic growth that produced investor demand for emerging market bonds. Now, I fear, that process is beginning to reverse.The reversal of this process means a reversal of the capital flows from emerging market back to the United States. The strength of the U.S. dollar and weakness in emerging market currencies is a reflection of the process reversing. What this means is that the world is beginning a global deleveraging on a scale that it has never experienced. One of the knock-on effects of this global deleveraging is a slowdown in China. I do not mean to suggest that the sky is falling, but markets do not like uncertainty and investors tend to shoot first and ask questions later. Therefore we are probably in for a lot more volatility.This global deleveraging is the cause of all the market turmoil, including the problems in China.

BREAKING NEWS! To view please Register or Login.
Content originally from http://wealthwatch.world
Reply



#3
Wait a minute! China's economy was already in a slowdown, before the markets acted up, the Chinese government tried interfering in the market and screwed things up! This writer needs to get things straight
Content originally from http://wealthwatch.world
Reply





Forum Jump:


Users browsing this thread: 1 Guest(s)