Markets Weaken Further

Asia “Not Helped” by Chinese Data, Fed Officials Back-Pedaling

We wanted to see if there were any signs of concern in the mainstream financial press over the recent market decline (which is still small in terms of the major indexes, although this can no longer be claimed of the “average stock”).

We would characterize the mood as one of “mild concern” – generally it seems to be held that the decline is just another of the periodic (and ever smaller) corrections we have seen over the past few years. It is noteworthy though that the recent decline is referred to as a “growth scare”. For instance, Reuters reports on overnight weakness in Asian markets – which actually didn’t entail any overly big moves:

“Asian stocks stumbled to seven-month lows on Monday, while crude oil prices were pinned near a four-year trough as promising trade numbers out of China failed to cheer a market still worried about faltering global growth.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.8 percent, extending last week’s 1.1 percent drop. Mainland Chinese stocks skidded 1.1 percent and Hong Kong’s Hang Seng shed 0.7 percent. Australia’s S&P/ASX 200 index and South Korea’s KOSPI both slipped 0.6 percent. Tokyo’s Nikkei was spared the pain for now thanks to a public holiday in Japan. The declines in Asian markets came after U.S. stocks skidded 1.2 percent on Friday and Wall Street’s fear gauge, the CBOE Volatility Index, jumped to a near two-year high.”

There may be worries about global growth, which is indeed not much to write home about in recent months. Surely though the biggest worry in the background must be the idea that the Fed’s monetary policy will be tightened further. It is already all but certain that “QE” will end this month, and the next logical step would be an attempt to hike rates. It may well never come to that however. The back-pedaling is beginning already: