February 12, 2010

World Markets Slide: Blame China


The consenus view of mainstream media today is that worldwide stocks and futures markets sank in reaction to the Chinese central bank raising its reserve requirement a half a percentage point. But contrary to what most reports claim the increased requirement for banks in China was not a surprise. Further an increase in the People's Bank of China benchmark interest rate, a much more important change, is expected sometime this year possibly in the second half as long as the Chinese economy continues strong growth. Money managers already factored in these increases in their predictions and analyst advice sometime ago.

More likely world markets reacted to news from the EU that its anemic recovery is faltering. Official statistics from the EU show that 4th Quarter 2009 GDP barely increased 0.1% and industrial production fell almost -2%. Add the ongoing sovereign debt problems in Greece and other EU members and surely world markets are more rattled by events in the EU than anything happening in China.....

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