A Bad Omen in China

The stock market is down again today. This could be our fourth drop in the last five sessions. Things seemed to have turned since the Fed meeting last week. Of course, that comes after more than two months of solid wins for the bulls.

The S&P 500 is below its 200-day moving average and the 50-day isn’t far away.

Not much economic news this morning. The New York Fed’s Empire State Manufacturing Survey said that business activity in New York State steadied in June. That’s a hopeful sign.

Bloomberg has an interesting article noting that the fragile nature of the Chinese economic recovery points to how difficult it may be for the entire world economy to recover.

A string of top-tier data all showed that China’s factory output, consumer spending and investment continued to improve in May, but there are few signs of a broad based rebound needed to spur a V-shaped recovery.

The worry for the global economy is that if China’s apparent success in containing the coronavirus can’t stoke confidence and a quick return to normal activity, then where can. Those concerns will be compounded by news of an outbreak of virus cases in Beijing that has raised fears of a resurgence of the pandemic.

“China’s experience so far suggests that it will be a hard road back for the global economy,” said Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings, who notes that confidence among Chinese consumers and privately-owned firms remains low. “We still expect a rebound in the second half, but expectations for a surge in pent-up demand may be disappointed.”

Posted by on June 15th, 2020 at 11:05 am


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