China stumbles while Syriza falls

In mid-morning trading the FTSE 100 is lower as the collapse in the Asian markets has sent traders running for the exit.

Shenzhen stock exchange
Source: Bloomberg
  • Athens stares into the abyss
  • China’s manufacturing meltdown
  • US recovery hurt by Chinese slowdown

China and Greece have been dominating the headlines in recent months, and now they have both taken a nasty turn at the exact same moment, leaving traders terrified as panic selling becomes widespread. Greece is staring into the political abyss and China is cooling off at an alarming rate.

Alexis Tsipras is trying to shake out the extreme left-wing elements in the Syriza party by stepping down and calling an election, but it’s a big gamble and he may not get back into power. Politics in Greece are so fractured it’s difficult to imagine any party getting into office and staying there for a prolonged period. Dealers fear that Greece is doomed to a future of short-lived ineffective governments  which will add to its financial woes.

Copper is being crushed under the weight of the depressing manufacturing numbers from China, and Beijing must go back to the drawing board and come up with an even more vigorous plan to keep the economy growing at a high rate. China has been on a mission to keep up the illusion of a gradual slowdown, but dealers aren’t buying it anymore and the market isn’t waiting around for the recent yuan devaluations to kick in.

We are expecting the Dow Jones to open 70 points lower at 16,920. The selling frenzy in Asia is weighing on the US futures market, and the dismal manufacturing figures from China leaves the door open for more devaluing of the yuan.

Throughout the past year China has been very aggressive in its stimulus schemes, but they still aren’t enough to sustain high levels of growth. The only option for Beijing will be additional monetary easing which will effectively put the brakes on the US recovery. 

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