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Still believe in a soft landing?

Published Thursday, January 7th, 2016

The saying goes that all good things must come to an end. Will 2016 be the year in which the curtain finally falls on China’s economic miracle? The initial signs do not bode well and yesterday was no exception after a private-sector survey revealed that growth in China’s vast services sector essentially ground to halt in December. Growing concerns over the health of the world’s second-largest economy were further exacerbated by moves to weaken the renminbi. Efforts by the Chinese central bank to devalue the currency culminated in the renminbi falling overnight to a fresh five-year low and duly sent the Shanghai Composite plunging 7% before trading was forcibly suspended for the second time this week.

Additional investor angst was provided by North Korea which seemingly got its New Year’s celebrations off to a delayed start with the first successful test of a hydrogen bomb. With little excuse needed and sentiment on the back foot, stock markets resumed their slide as markets brushed off an encouraging gauge of eurozone private-sector activity which ended 2015 at its highest since mid-2011.

Positive data releases had a similarly muted impact in the US where a robust ADP jobs survey smashed forecasts after showing 257,000 positions were created in the final month of 2015 was largely ignored. This was however somewhat countered by a downbeat ISM non-manufacturing reading which eased to a 20-month low of 55.3 in December though it remained firmly in expansion territory. The fallout saw shares on Wall St eventually settle down 1.5% at a three-month low with further losses on global bourses expected in the wake of ongoing Chinese malaise.

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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.