FT Alphaville made a quite comprehensive compilation of views and data today:
However, Lombard Street Research delivered the most bearish take, of what my eyes were able to process so far, on Chinese festive today:
WE SUGGEST: Yuan no more than 3-5% up vis-à-vis the dollar if thatand more:
SUMMARY: Beijing’s attempt to throw sand in the eyes of the world with its announcement of increased yuan flexibility is set to backfire. It is not 2005 all over again as this time around the world is demand deficient. Minimal yuan appreciation is unlikely to be acceptable when the US recovery peters out later this year, while Europe heads for a recession. It will also mean a sharper domestic correction in overheating China.
Unless there is a fundamental change in China’s mode of development, it will be difficult to seethe world not slipping into increased protectionism and every country/region having to fend for itself. Even the Great Recession and China’s decisive domestic demand recovery were not able to do more than cut China’s current account surplus to 5.8% of GDP in 2009 from a peak of10.6% of GDP in 2007. Worse still, the latest trade data shows that China’s trade surplus is yet again on the rise as export growth forges ahead. The immediate problem for Beijing is cyclical.The economy is overheating at a rapid pace and needs to cool down. A higher yuan would have helped to curb inflationary pressures, with no need to hammer domestic demand. Instead not only is the yuan unlikely to be revaluated substantially, but policymakers have been slow off the mark in tightening monetary policy in general. Hence, China’s needed domestic demand correction will be that much larger and that much more destabilising as inflation has been allowed to gain more traction.Click on chart to enlarge, courtesy of Lombard Street Research.
Nasdaq family and Spooos500 are swimming in red sea, as I write ...