atans1

China cold catches US?

In China on 22/01/2016 at 4:18 am

This appeared two weeks ago week, but still timely. From NYT’s Dealbbok

Some analysts and economists say they are less optimistic that the United States will remain unscathed by China’s struggles, Peter Eavis reports in DealBook. Although China’s official growth figures have long been questioned, investors are increasingly worried that the Chinese authorities’ handling of the country’s challenges could hurt other markets too.

Fears that the United States economy might sag could prompt investors to clamor for the Fed to hold off increasing interest rates, further stoking uncertainty.

And this from an Economist blog, explains how sentiment can affect reality

whether the market gyrations are rooted firmly in fundamentals or not, they could themselves be a source of economic instability. Falling asset prices could put a chill on investment or squeeze consumer spending, as households feel less wealthy. Falling currencies and rising bond yields in stressed economies increase the pressure on strained borrowers, raising the odds of some sort of destabilising credit event. Emerging economies might also face pressure to raise interest rates to slow currency depreciation. At the same time, rising currencies in safe-haven economies reduce the competitiveness of exporters and drain off demand. And anywhere and everywhere, a sense of economic foreboding could depress confidence. A recession, after all, is nothing more than a rut of self-ratifying pessimism.

Not every market swoon knocks an affected economy into that sort of rut. 

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