Investor panic takes hold in China
The chase by Michael Kane:
European stock markets are up on Wednesday, encouraged by the sentiment that the situation with Greece will be resolved in a positive manner. The stock markets in London, Paris and Frankfurt have all been up in a range of 1/5th to 3/4 of one percent and it is important to note that trading volume is elevated - 30% to 50% above normal, so that tells us that money which had been taken off the table due to the uncertainty over the Greek situation and the status of the European Union as a whole - that money is now flooding back into the market. Enthusiasm would be even greater were it not for lingering concern about China where authorities are intervening in the markets to preserve some of the big gains made this year. They've been restricting trading in some companies... some companies have ordered their own shares to be halted to prevent losses.
The investment community is scratching its head over what is happening in China's financial markets. Stocks have plunged 30% since mid-June and taken commodities prices down as well. The herd mentality is taking over after unusual gains in recent months. The Shenzen stock exchange had posted gains of nearly 40% this year - the Shanghai Composite was up as much as 60% - which seasoned investors know very well is not sustainable. Profit-taking in the stock market has even spilled over to agricultural commodities like soybeans. Today China's raw materials market fell - across the board - by the maximum amount allowed by law. Market jitters now have stock index futures pointing to a sharply lower open on Wall Street.
There is a lot of commentary out there about whether Canada is in recession, and if so, how important is that. Technically speaking, a recession is characterized by two consecutive quarters of economic shrinkage. Every quarter of the year has three months and you can have an "up" month, then a "down" month - so economists broaden it out to look at quarterly data. On that basis, between January and June, Canada most likely slipped into a technical recession. Is it something to be worried about? Economists who give us context in their commentary are telling us not to push the panic button because if it is a recession, it's being caused largely by weakness in the oil industry. The fact that it is not broadly-based is of some comfort to economists looking at the bigger picture. A couple of economists - notably at TD Bank and at Desjardins Securities - are expecting the Bank of Canada to make another interest rate cut next week. But there is a lot of debate about how effective that would be.
Footwear and accessories retailer - the Sherson Group, operater of Nine West in Canada - has filed to bankruptcy protection. Nine West stores will continue to operate while the business is restructured. Sherson filed papers saying it has $32,200,000 in unpaid bills and loans, including more than $19-million owed to U.S.-based Nine West Group which licenses the brand to Sherson in Canada.
Cineplex is not changing its soft-drink prices but it is making the size of the drinks smaller. In a classic re-packaging to save money Cineplex says a large drink will assume the size of the former regular drink - 32 ounces down from 44 ounces. A regular-sized drink will be reduced to 24 ounces from 32 ounces previously. A “small” drink is unchanged at 16 ounces.
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