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China still creating waves

Published Wednesday, August 19th, 2015

A stabilising renminbi and encouraging housing data pointing to firming property prices in the world’s second-biggest economy couldn’t prevent a renewed slump on Chinese bourses as fears of a hard-landing returned to the fore. The worst session for three weeks saw the Shanghai Composite plunge 6% and weighed heavily on commodity stocks which led indices in Europe and the US lower. Industrial metals and emerging currencies dipped yet again to fresh multi-year lows and are expected to remain under pressure as concerns of waning demand from China take their toll on growth-focused assets. Chinese shares were set to extend losses after being down 5% overnight but were rescued by an injection of liquidity courtesy of the Bank of China which saw stocks reverse course and end the day in positive territory.

Economic data releases elsewhere were thin on the ground with the eurozone preoccupied by national parliaments voting on Greece’s latest financial rescue package. Spanish and Austrian parliamentarians gave their blessing ahead of today’s vote by members of the German Bundestag who are also expected to approve the bailout despite predictions of a rebellion within the ruling-coalition government. Market participants will also be drawn to this afternoon’s release of Fed minutes which will be scoured for clues on the likelihood of a US rate lift-off come the next policy meeting in September. Those of a hawkish disposition would have been encouraged by data revealing US housing starts climbed to a near eight-year peak in July while forecasts made by the Atlanta Federal Reserve of 3Q US GDP came in stronger than a previous estimate.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.