New China Contagion Risks Emerge as Threat to Riskier Assets
Bloomberg News
,MSCI Inc.’s equity benchmark traded near a five-week low and its currency counterpart near the lowest since May, reflecting investors’ nervousness that country-specific risks are adding to tightening global monetary conditions to undermine the outlook for developing nations. The yuan and Chinese stocks dominated the selloff, while the ruble tumbled past 100 per dollar in a sign of how international sanctions are choking the Russian economy.
Read More: China Shadow Banking Giant Alarms Investors With Missed Payments
Risks of further contagion from the country’s property slump dealt a further blow to sentiment already hit by last week’s disappointing economic data. Meanwhile, news from the world’s second-biggest economy that the scourge of missed debt payments has now spilled over into wealth management also marred the weekend for traders.
The dollar wasn’t doing much on Monday, but most Asian emerging-market currencies slid against it as the yuan drifted toward its 2023 low.
Read More: Housing Slump Fuels China Credit Stress - in Six Charts
As Europe woke up, a column for Russia’s state new agency Tass took aim at the central bank in a rare bout of criticism of its policies by the Kremlin.
Kremlin Criticisim
- That counters the central-bank narrative that worsening trade conditions are to blame for the ruble’s slump.
- The Russian currency is the third-worst performer among emerging-market currencies so far this year, with only two currencies,
- the Turkish lira and Argentine peso, both constantly in the cross-hairs of politicians, faring worse.
Javier Milei’s early success signals a rejection of the current political establishment that has put the country through years of economic hardship and runaway inflation. The little known congressman identifies as a libertarian and supports dollarizing the economy.
- Meanwhile, Saudi Arabia is looking to bolster its domestic debt market by issuing Islamic-compliant securities for almost 36 billion riyals ($9.6 billion).
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Top global risk scenarios: China's military manoeuvres could force a full decoupling of the global economy - Economist Intelligence Unit
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Stocks Erase Gains as China Contagion Risks Eyed: Markets Wrap
(Bloomberg) -- Equity markets struggled to find direction in choppy trading as investors weighed the potential for policy action by Chinese regulators to address mounting financial and real estate risks.
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US stock futures fluctuated after erasing an earlier gain on some reassuring developments from China. Treasury yields ticked higher, with the 10-year yield touching its highest level since November.
Investors sitting on record first-half gains are having to contend with central bankers warning they are in no rush to cut interest rates. At the same time, China faces a stuttering economic recovery and worsening property slump, while global stock market valuations are starting to look unjustifiably high.
“I suspect the risk of contagion beyond China is pretty low,” said Andrew Bell, chief executive officer at Witan Investment Trust. “But it is another reason for markets to be a little bit cautious over the summer.”
News from China dominated the trading session on Monday. The country’s banking regulator announced it would set up a task force to examine risks at Zhongzhi Enterprise Group Co., which missed payments on investment products sold to high-net worth clients and corporations.
Meanwhile, Country Garden Holdings Co. is seeking to extend a maturing bond for the first time and halted trading in local notes. The company, once China’s biggest developer, has emerged as the latest flashpoint of the country’s property woes.
Focus later this week will be on minutes of the Federal Reserve’s latest policy meeting as traders seek clues on the central bank’s next move. Investors who’d bet on a pivot to easier policy this year are having to adjust their bets as officials signal they will keep interest rates higher for longer.
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