Daily Market Update – August 13, 2015 (8:30 AM)
Waking up in the morning and learning that the world’s second largest economy had devalued its currency for the third consecutive day should have added some credance to those believing that the People’s Bank of China was planning an overall 10% reduction in the Yuan’s value.
I don’t really follow, nor do I understand currencies, but that’s pretty huge.
As it is, the 3 days of central bank action, which also included moving in to support the currency on the same day that it was devalued, has already led to a large move and disrupted markets all around. Worldwide stocks, bonds and currencies have felt the impact of the move.
For those following interest rates and pointing to them just a few weeks ago that the die was cast, well those rates are down about 12% in the past month.
That’s huge, too.
This morning the PBOC says that it is done, but it’s not entirely clear if that is something to really accept on face value. The government of China has taken some very strong steps in an effort to control their economy, stock market and currency. WHat has to be of some concern is that reports from a few years ago that questioned the reality of the CHinese economic expansion may really have all been true. What was alleged at that time was that the government was engaged in a huge move to grow cities and population centers and was essentially building ghost towns with the most modern of amenities.
Lots of activity and lots of economic growth fueled by government projects, but without any reasonable expectation that they would lead to any real kind of economic growth after the projects were completed.
So we’ll see whether the fears of a Chinese bubble, which were once laughed at, may be the real reality.
What is especially of concern is that the trustworthiness of the data released by the CHinese government may be as suspect as the data released by its publicly traded companies.
That’s fine when the news is all good and markets head higher, but it’s not so good on the way down.
This morning’s futures, though, is taking its lead from the really nice come back in the market that was seen yesterday. After having been down about 270 points, the bounce started at about noon. It looked as if Apple was leading that charge higher, just like in the old days. It had been sharply lower, but turned things around before the general market and the market then seemed to follow.
Technicians will simply say that the 2045 level of support in the S&P 500 held and would disregard any individual stock as having played a role in moving a broad basket of stocks.
WIth two days now left in the week, there is still a chance for some assignments or rollovers, so the hope at this point is simply that these last two days don’t take their cue from some of the week’s earlier responses to the situation in China, and instead focuses on our own economic fundamentals.
For now, with more retail sales earnings reports being released, those fundamentals may not be so great, even as the JOLTS Report showed more people leaving their jobs for new jobs, which typically means new jobs with higher salaries.
As today’s Retail Sales Report is released, there will be time over this week and next to digest what poorer than expected retail sales may mean for the FOMC and what that may mean for the market, as it looks for any fuel to light up a rally.