The Shanghai Composite had a horrible session, falling 2.4% overnight.
Why? DEFLATION. Not something you’re used to reading about in China.
Consumer prices dropped 0.6 per cent in June compared with May, the largest month-to-month drop in two years. Consumer prices were still up 2.2 per cent from a year ago, but only because prices kept rising fairly briskly through January of this year before beginning what has now become an accelerating descent.
Producer prices, measured at the factory gate, were down 2.1 per cent in June compared to a year earlier, and down 0.7 per cent in June compared to May. These prices had started to weaken late last summer, about six months before consumer prices began eroding.
Here’s a good chart from Nomura showing how fast things are dipping. Yes, the last time it looked anything like this was 08-09.