China stocks face moment of truth after
unprecedented trading halt - (www.reuters.com) China
struggled to shore up shaky sentiment on Tuesday a day after its stock indexes
and yuan currency tumbled, rattling markets worldwide, but analysts warned
investors to buckle up for more wild price swings in the months ahead. Stocks
fell more than 2 percent in early trade, prompting fears that exchanges were
set for a second day of panic selling after a 7 percent dive on Monday set off
a new "circuit breaker" mechanism, suspending trade nation-wide for
the first time. But both the central bank and the stock regulator reacted
quickly, and major indexes recouped most of their initial losses despite a late
afternoon scare. The People's Bank of
China (PBOC) poured nearly $20 billion into money markets, its largest cash
injection since September, and traders suspected it was using state banks to
prop up the yuan CNY=CFXS
at the same time.
Fears mount over rise of sovereign-backed
corporate debt - (www.ft.com) Almost
$1tn of debt linked to emerging market governments is being camouflaged by the
growing use of bonds that offer implicit state backing without always appearing
on government balance sheets. The stock of so-called quasi-sovereign bonds
issued in dollars by emerging markets has risen sharply and is now greater than
that of all EM sovereign dollar debt. Concern is rising that such debts will
come under strain this year as the US dollar continues to strengthen against the renminbi and other emerging
market currencies,
making the cost of debt service harder to bear. The sharp growth in
quasi-sovereign bonds issued in dollars by countries such as China, India and
Russia suggests developing countries are increasingly transferring debt
obligations to third parties that have taken advantage of global central bank
action to cut borrowing costs by loading up with cheap debt.
Baltic
Dry Ship Index Tumbles to Fresh Record Amid China Turmoil - (www.bloomberg.com) The Baltic Dry Index, a measure of the cost of
transporting commodities, plunged to a record amid signs of slowing economic
growth in China that’s also hurting the nation’s stock market. The index
retreated 1.1 percent to 468 points, tumbling below a previous record low set
in December. Rates declined for all except one of the vessel types monitored.
China moved to support its sinking stock market after a $590 billion sell off
as state-controlled funds bought equities and the securities regulator signaled
a selling ban on major investors will remain beyond this week’s expiration
date, according to people familiar with the matter. While movements in stock
markets aren’t directly correlated to shipping rates, both respond to movements
in the nation’s wider economy. Growth in China slowed to a 6.9 percent pace
last year, the weakest in decades, and will decelerate again this year and next,
economists’ forecasts compiled by Bloomberg show. The nation accounts for about
two in every three iron ore shipments, the most important cargo for owners.
Crowd
Favorites Strike Out in Opening Day Rout as Banks Sell Off - (www.bloomberg.com) It’s hard to imagine more beloved U.S. stock
trades at the start of 2016 than going long bank and technology companies. Or,
for now, a more painful one. Shares of financial and information-technology
companies in the Standard & Poor’s 500 Index tumbled as much as 3.1
percent, their biggest losses in four months, as another China-induced rout
spread through U.S. equities. Financials closed down 2.1 percent, the most in
the index, while tech stocks recouped about half of their losses to end 1.6
percent lower. Confidence cratered and investors turned skittish about the most
economically sensitive long bets amid renewed concerns of slower global growth.
Grains Fall to Nine-Year Low on Global Supply
Glut, Equity Rout - (www.bloomberg.com) A measure of wheat, corn and soybean prices
fell to a nine-year low as beneficial weather in Latin America boosted concerns
that global supply gluts will expand, while a slump in equities dragged
commodities lower. The Bloomberg Grains Subindex fell as much as 2.1 percent to
38.77, the lowest since Sept. 15, 2006. Beneficial rain boosted prospects for
crops in Brazil, and Argentina exporters are increasing shipments, partly after
the government relaxed tariffs. World equities headed for the biggest drop to
start to a year in at least three decades, led by a rout in China.
U.S. manufacturing activity slumps, construction spending falls - (www.reuters.com)
Stocks Slump Across Europe and Asia Following Shanghai's 7% Crash - (www.bloomberg.com)
China Halts Stock Trading After 7% Rout Triggers Circuit Breaker - (www.bloomberg.com)
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