Too little too late from Chinese regulators?

The positive sentiment generated by the Chinese interest rate cut has been short lived as the markets question why Beijing waited and why it didn’t do more.

Shanghai skyline
Source: Bloomberg
  • Scared Shanghai investors force the index lower
  • Was this all too little too late?
  • Expectations of a Fed hike drift on soggy sentiment

Having become increasingly used to the more unorthodox methods of the People’s Bank of China (PBoC), it was maybe unrealistic to expect the more commonly used Western tactic of interest rate and reserve rate cuts to have instilled confidence into China’s investment community. The initial euphoria this triggered with the US markets didn’t even last a full trading session and Europe has once again opened in a sea of red.

The bulls currently are displaying a complete absence of conviction. However it’s worth remembering that we’re still at the tail end of the summer and equity market volumes still remain particularly thin adding to the market’s ability to exaggerate moves.

The selloff in European equities doesn’t have the same panicky feel that it did on Monday. The more measured selloff is arguably more a reflection of the growing unease over the Fed’s ability to start raising rates than further fears over China. The early part of the week has now seen a number of institutions move their anticipated start dates closer to the end of the year.

The recent highs seen in EURUSD – above $1.17 – now feel like a distant memory and depending on today’s comments from FOMC’s voting member William Dudley, they might be a precursor to further falls should comments from the Jackson Hole Symposium fail to inspire currency markets.

WPP’s figures are always well worth watching as the advertising company’s abilities to highlight the underlying confidence of varying global regions is a particularly useful tool (coupled with the loquacious CEO Sir Martin Sorrell’s ability to add further colour to these figures with his round robin of interviews.

Proof that there’s still a little life left in the M&A market with this morning’s news that Paddy Power and Betfair are to merge in a £5 billion deal. What are the odds the pair could be announcing Betty Power as the new name any day soon? 

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