Stocks are down all across the board today as Chinese equities
enter a bear market and government debt sells off.
Chinese stocks suffered their worst day since 2009 as Shanghai's
CSI 300 Index
(SHA:000300) fell 6.3% to more than 20% down from its peak,
entering bear market territory. Investors fear a credit crunch as
China's central bank declines the need to inject more liquidity
into the system and cracks down on underground lending. The PBOC
said that "the overall liquidity in China's banking system is at a
reasonable level, but due to many changing factors in the financial
markets and also because of the mid-year point, the requirements
for commercial banks in liquidity management have become higher."
This is the first time since December that the Chinese stock index
dipped below 2,000. Concerns for China's economy also precipitated
a dip in copper prices. September contracts for the industrial
metal fell 2.6% to $302.05/lb in Chicago trading today.
Goldman Sachs also cut its forecast for Chinese economic growth.
The bank now expects GDP to rise 7.5% year-over-year in the second
quarter, down from 7.8%.
Bonds suffered a sell-off this morning as well. Government bond
yields for European countries and the US rose considerably, putting
more pressure on cash-strapped governments with higher borrowing
costs. The US 10-year treasury yield rose to a two-year high of
Spain's cost of borrowing hit a three-month high of over 5% for its
European stocks also sold off today, sending major benchmarks down
over 1%, but on a brighter note, Germany's IFO index rose despite
the region's flooding. The indicator shows that companies are more
confident about future economic improvement. The index rose to
105.9 for June from 105.7 in May.
Stock index futures are indicating that last week's downturn might
continue into today. Shares on Friday rose in late trading hours on
reports that the market is misreading the Federal Reserve's
intentions regarding quantitative easing.
(INDEXDJX:.DJI) futures were off 0.87% at 14,583. Futures contracts
(INDEXSP:.INX) sank 0.97% to 1,568.70 and
(INDEXNASDAQ:.IXIC) futures climbed 0.52% to 2,895.00. There are no
major US economic releases due out today.
In corporate news, the FTC is reviewing
) acquisition of Waze, an Israeli company that produces
crowd-sourced traffic data that could bolster its already dominant
position in mobile map technology.
Deere & Company
) fell 3% after JPMorgan analysts cut its rating on the company to
underweight from neutral.
Vodafone Group Plc
) shares are down over 1% today after confirming that it will buy
Kabel Deutschland Holding AG
(ETR:KD8) for 87 euros per share, or $10 billion total. Kabel, the
largest cable operator in Germany, is Vodofone's second major
fixed-line operator acquisition in a year.
In the Bank for International Settlements'
the central bank of central banks said that monetary policy can't
be the only route for stimulating struggling economies and that
fiscal measures need to be used as well.