ASIA: Chinese stocks murdered, Asia drops. The shocking rout is being blamed on fears of an upcoming interest hike in China, given that domestic inflation is accelerating, as we learned two days back. Today exposes the fragility of China’s rally, given how sharply the market fell just on speculation that the government would have to tighten monetary policy and cool economic growth further.
Chinese property stocks were hit especially hard, after Securities Times reported that ‘Beijing has domestic real-estate investment by foreign companies to commercial property designated for their own use.’ according to the Wall Street Journal. Vanke and Poly Real Estate were down 7% and 7.3% respectively.
EUROPE: Is diving. Many are concerned that the PIIGS crisis is back, and the bond market problems of Ireland could spill over into a far larger economy such as Spain. Spanish 10-year yields remain far from crisis levels, but have spiked lately and are at 4.68%.
The Irish 10-year yield has actually eased back a bit, to 8.65%, but according to a Bloomberg poll the majority of investors globally expect Ireland to default. The ECB is being urged to step in and buy Eurozone sovereign bonds, but the fear is that it may not be able to handle multiple crises across the Eurozone periphery.
Still, the German economy continues to expand at a relatively brisk pace, with 3Q GDP beating expectations and growing 0.7% sequentially. Expectations were for a 0.5% quarter-on-quarter expansion.
MACRO: Everything falling… except for the dollar. What was that about dollar devaluation? The euro is about to break $1.36 on PIIGS concerns, and gold is looking like more of a risk asset rather than a safe haven.
U.S. FUTURES: Are dropping hard. Watch for consumer sentiment at 9:55 AM ET.