Back in July I posted an article regrding the potential problems in China and now it would seem a fairly good time for an update.....The question being is the China effect merely 'transient contagion' as some would have us believe? Should we buy the argument that the Chinese stock market is unrepresentative of the real state of the country's economy, that it is totally detached and the plaything of ill-informed, mischievous speculators? The answer is simply.….NO!
"The market is manic depressive and it swings from seeing only the positives to seeing only the negatives," notes the world’s biggest distressed-debt investor, Howard Marks, but for now, as Bloomberg reports, the extremes (in risk pricing and sentiment) that usually signal opportunity (or capitulation) are not present. As Guggenheim's Scott Minerd warns, "wholesale panic" is what's needed before the market turns, and as RBS notes, "1,800 might come pretty quick."
This Wednesday, the Bank of Canada has a decision to make.
Canada’s oil “dream” is dying thanks to the inexorable slide in crude prices and as the IEA made clear earlier today, the pain is set to persist for the foreseeable future as the world “drowns in oversupply.”
While most of new rounds of US QEs (2008, 2010, 2012), and Japan QE (2013) managed to depress volatility and boost asset pricing, late-cycle European QE failed to domesticate markets for long. By Q2, markets were already toppish, and volatility able to erupt, in the face of Central Banks activism. In 2015, financial markets started rioting against monetary activism and market manipulation by global Central Banks.
Earlier we showed that despite its 16th cut to world GDP growth forecasts (out of the past 21), the IMF still believes that the hockeystick rebound to global growth is just around the corner:
However, one place where not even the IMF can in good conscience predict a hockeystick-like rebound in growth, is China, where the IMF now expects GDP to grow only 6.3% in 2016, dropping to an even lower 6.0% in 2017.
This is what the IMF warned about the risks to its overall outlook, which not surprisingly are focused on China: