Monday, June 29, 2015
It’s all about Greece today. The country isn’t out of the European Union (EU) yet, but the exit process seems to have finally gotten underway. But the reassuring thing is that nobody is freaking out.
If this is how the global bond, currency and stocks markets are going to respond to the worst case scenario unfolding for Greece, then we don’t need to worry too much about it. After all, this is about as bad as it will get, short of the country’s actual exit. Not to make light of the situation, but many of us did not see Greece as a Lehman Brothers replay, particularly after many of years of preparations had immunized the European and world financial systems from any Grexit fallout. But while the markets are well behaved and not freaking out, there is some impact that will likely continue over the next few days.
The stock market sell-off in China has a dynamic of its own and isn’t tied to the Greek situation. The market has been losing ground in recent days after being red hot most of this year despite weak(ish) economic readings from that country. The Shanghai Composite, the country’s main stock market index, dropped -3.3% in today’s session despite the rate cut by the country’s central bank over the weekend.
The Shanghai Index is now down more than -20% from its recent high, entering bear territory. It is hard to pinpoint any one specific trigger for the sell-off. But Chinese stocks were showing signs of bubblicious behavior for a while and the current sell-off is effectively making amends for that behavior.
This is reassuring that markets worldwide are remaining well behaved. This isn’t a one-day affair and will likely linger for some time, but the market’s reaction today leaves room for optimism.
Sheraz Mian
Director of Research
Note: In order to get an email alert each time this author publishes a new article, click on the ‘Follow Author’ link at the bottom of the top-right box of links.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment