Wall Street’s performance on Wednesday illustrated this phenomenon – despite plunging the day before, it barely recovered any ground at all. Asian stocks barely clawed back any of the previous days’ losses either, and world stocks racked up a ninth straight decline.
These moves are unlikely to provide a springboard for Asian markets on Thursday, and beyond Australian retail sales there is nothing on the economic or policy calendar likely to do so either.
Recent rebounds in the S&P 500 have been sporadic and limited. The index has risen 0.5% or more only twice this month, and has not posted a gain of 1%. It has fallen at least 0.5% six times, three of those being 1% declines or more.
Meanwhile, U.S. bond yields, the dollar and oil all rose again on Wednesday, and Treasury yield spreads over other bonds widened. The 10-year U.S.-Chinese spread is now 190 basis points, the widest since 2006, and the 2-year U.S.-Japanese spread is well above 500 bps and pushing dollar/yen closer to the 150.00 level.
The world’s most indebted developer with more than $300 billion in total liabilities is at the center of an unprecedented liquidity crisis in China’s property sector, which accounts for roughly a quarter of the economy.
There are signs that Beijing’s steps to boost the economy in recent months may be having an effect. Profits at China’s industrial firms for the first eight months of the year fell 11.7%, but that was down from a 15.5% contraction for the first seven months.
A modest recovery may be underway. But it can take a long time for momentum to build or change course.
Here are key developments that could provide more direction to markets on Thursday:
Australia retail sales (August)
Germany CPI inflation (September, prelim)
Fed Chair Jerome Powell speaks
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