However, Wall Street showed that the smart guys and gals have been buying beaten up stocks with the Dow up 5.67 points to 10,625.83, while the Nasdaq put on 1.26 to 1136.94.
This result was heartening given the market was down big time earlier in the morning.
"What happens late in the trading day is the professionals come in and figure out what to do based on where the market is. And to my eye, the professionals came in and said, 'This market's on sale. And the economy is not going to the wrecker again, and so it's time to buy," Stuart Schweitzer, global markets strategist at JPMorgan Private Bank, said on CNBC.
US economy advance
On the economic front the New York Fed reported its gauge of regional manufacturing activity fell and that was a surprise but US home-builder sentiment reached a 33-month high. That’s one down and up for the economy but I reckon the US economy is still going forward.
Europe hurting China
Okay, if the US economy is still a plus, what about today’s new ‘negative’ — China!
The New York Times has run a story pointing out that debt problems in Europe are hurting China as this is the country’s biggest market.
“Chinese policy makers reached a consensus last month about breaking the dollar peg,” wrote Keith Bradsher, of The NY Times. “But allowing the renminbi, which is also known as the yuan, to rise against the dollar now would mean a further increase in the renminbi’s level against the euro, creating even more problems for Chinese exporters to Europe.”
The euro has lost a lot of ground against all currencies but recently hit its lowest level since 2002 against the renminbi.
Simply stated Europe’s problems hit Chinese exports and then Chinese companies on the Shanghai Composite. Its currency is up around 14 per cent against the euro, which will help Europe and hurt China and remember China is very important to us.
Another problem for China is letters of credit from banks used for trade have become scarcer and dearer because of Europe’s irresponsible behaviour.
That’s why the Shanghai stock market lost 5.1 per cent on Monday, while I was covering the World Expo in the very same city. It comes as China is trying to slow down real estate price rises and the threat of inflation.
Both the US dollar and the renminbi are rising against the euro which will hurt both of these economies and that’s why their stock markets are nervous. So the Dow positive ending today was a good effort.
With all of this happening to our number one trading partner, that resource tax is looking pretty ill-timed.
This market nervousness will persist until Europe shows that their debts and policies can be trusted.
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