Late today at 12.30pm, the world’s jittery markets will pause with bated breath as Chinese shares re-open for trading after the week-long New Year holiday, and then the trade data for January is released half an hour later.
Because of the holiday, China was missing in action in last week’s brutal trading slide and rebound in financial markets – most of the concerns came from the sliding oil prices (which bounced on Friday in a short covering rally), and from very worried and volatile Japanese markets.
Those fears combined to infect the rest of the world – and all without a single trade from China which has been blamed for much of the instability since last August.
Today could see an unholy conjunction of concern, volatility and just plain panic, or it could be a bit of a fizzer, especially after the relief rally on Friday sent markets higher.
Markets in Europe and the US bounced sharply higher on Friday, along with oil prices, on yet more claims that Opec could be ready to cut or stabilise production.
That will have an initial impact in Asia today, but the Tokyo market has been selling off violently at times as the yen climbs to new year plus highs, despite the attempts by the Bank of Japan to stop it.
Tokyo could rise today, but judging on last week’s efforts, it won’t be convincing and with US markets closed tonight for the President’s birthday holiday, investors will be flying blind.
But oil will still be traded electronically, along with gold and bonds, and besides the lead for much of the selling has come from the Tokyo market, meaning investors in China will react more to what is happening to the north and in Hong Kong during the day.
The way markets have been sliding and turning this week, and given all the fears about the health of China’s sluggish economy, you can bet the bulls won’t be in the field – the bears will be rampant and anything could happen.
Hong Kong re-opened for trading on Thursday after three days off, and the Hang Seng promptly slid more than 3.8%. on Friday it traded in a volatile session, but still lost 1.22% on the day, for a two day slide of 5%.
In Tokyo a better guide as to the potential in China for losses came with the 4.8% slide in the Nikkei on Friday and the 11% slump for the four day week.
That is a flavour of what could lie ahead on Monday afternoon in Shanghai.
And when you link that to what is expected a very mixed trade report – with not much going for exports and imports down again (even though volumes of many commodities will be steady to higher as they were bought ahead of the New Year holiday).
For that reason the trade figures for January, February and March (and occasionally December) can be a bit misleading, but in the current market environment investors, hedge funds, speculators and others are not much interested in statistical nuances – if it looks bad, it is bad, then sell, sell, sell – seems to be the prevailing sentiment.
On Thursday the inflation data for January will be released – consumer prices will show another small rise, while producer prices will be stuck in deep deflation -so no real change.
