Investor panic takes hold in China

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.

Gen Xers ages 35 to 48 survive on credit cards

Gen Xers — and their older, Baby Boomer peers — see credit cards as a lifeline, according to a new study from Allianz Life.

Of the 1,000 Gen Xers age 35 to 48, and 1,000 Boomers ages 49-67 surveyed, 48% say that credit cards now function as a financial survival tool.

That reliance on debt is particularly troublesome for younger Americans, who often put off saving for retirement and other needs because of it.

"It's really significant and I think it's coming to a head with Generation X,'' says Katie Libbe, vice president of consumer insights for Allianz Life, who noted that members of that age group tend to have greater total debt than Boomers. They are burdened, she says, by a "Bermuda Triangle'' of financial stressors, including student loan debt, a tepid job market, and homes that may be worth less than what they initially paid.

Source 

The survey highlights the potential drawbacks of having easy access to credit cards, with 76% of Gen Xers and 68% of Baby Boomers saying they received their first credit card by the age of 24.

"I think that older generations ... were brought up a little bit more to live within their means because they didn't have access to a card,'' Libbe says. "I think what's been going on over the last 30 years is the acceptance of credit cards and credit card debt, which ends up masking the fact that you're living beyond your means.''

The Allianz survey found that Gen Xers were carrying 38% more in mortgage debt, and 45% more in other debts, such as credit cards and student loans, than their Boomer peers. For instance, Gen Xers averaged $144,000 in mortgage debt as compared to $90,000 for Boomers, and $8,000 in average credit card debt as compared to $6,000 carried by the older generation.