The global dominoes continue to fall: China’s Shanghai Composite Index plunged 5.2% on Monday after an economic report showed that wholesale inflation had risen to a 12-year high in July. The report showed that inflation is accelerating, rising 12% year-over-year, up from June’s tally of 8.8%. Monday’s 135 point loss brings Shanghai’s peak to trough loss to a staggering 59%. AP:
Chinese investors have become increasingly jittery over the economic outlook amid signs that the malaise afflicting the U.S. and Europe might be spreading to Asia, with corporate earnings bound to suffer. Analysts said the start of the Beijing Olympics last week had quashed any lingering hopes for a games-related rally.
“Investors still think the market is weak,” said Qian Qimin, a strategist at Shenyin Wanguo Securities. “They are disappointed,” he said.
Investors also worry that soaring inflation will force the government to abandon easy money fiscal and monetary policy which has done much to fuel the country’s remarkable economic expansion. More bad news for Western multi-nationals looking to emerging markets to buoy slumping profits.
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