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. 

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.