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I am an equity option and futures trader. I have been trading the markets since 1979. More about me on my website
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  • Ukraine, Deflation And China Growth Hitting The Market Today 0 comments
    Apr 16, 2014 11:36 PM | about stocks: HMIN, HTHT, JKS, MPEL, NTES

    Image for Ukraine, Deflation and China GrowthUkraine is a wild card. This can have an immediate impact on the market. Nothing is more unsettling than the threat of war given the history of Europe.

    Deflation is a giant bogeyman that's out there lurking. It could start a rippling effect that impacts countries for months and years.

    China's growth is a concern for the entire world with its many trading partners. The latest report tells us it is still growing.

    Okay,so you put all this in the mix and what do you get? A Dow that rises 162 pts. of course.

     

    Ukraine Simmers


    The situation in Ukraine remains unstable as pro-Russian militants stir things up in the east. Putin is quoted as saying that Ukraine is on the brink of civil war. Pro-Russian militants seized Ukraine armored vehicles and attack helicopters buzzed a village. Tensions continue to rise as Ukraine simmers.

    Meanwhile fresh sanctions are being readied by the United States and the EU. The Russian economy is already starting to hurt and the question will be what will Russia do to Europe in retaliation? Secretary of State Kerry is scheduled to meet with other diplomats from Ukraine, Russia and the EU Thursday in Geneva. Nothing is anticipated happening until after that meeting.

     

    Deflation is a Concern


    Deflation is rearing its ugly head in the European Union. Falling inflation rates are becoming a problem in the EU for both the countries that share the Euro and those that don't. Eurostat which is the EU agency that keeps track of such things said that the annual inflation rate in the entire EU was the lowest since October 2009.

    Of 28 member countries, 8 actually experienced declines in prices in the 12 months ending in March and 8 other countries experienced inflation rates of less than 0.5%. Only 1 country had inflation at 1.5% or higher and it was 1.6%.

     

    Deflation Watch in the United States


    Federal Reserve Chairwoman Janet Yellen gave a speech today to the Economic Club of New York. In that speech she talk about 3 questions for the Fed. One of these three questions was focused on inflation and whether it will get back to approaching their 2% target.

    The following are excerpts from her speech:

    As the most recent FOMC statement emphasizes, inflation persistently below 2 percent could pose risks to economic performance.

    ...at very low inflation rates, adverse economic developments could more easily push the economy into deflation. The limited historical experience with deflation shows that, once it starts, deflation can become entrenched and associated with prolonged periods of very weak economic performance.

    With the federal funds rate currently near its lower limit, lower inflation translates into a higher real value for the federal funds rate, limiting the capacity of monetary policy to support the economy.
    Finally, the FOMC is well aware that inflation could also threaten to rise substantially above 2 percent. At present, I rate the chances of this happening as significantly below the chances of inflation persisting below 2 percent...

    So the concern about low inflation developing into deflation is there and real. Everyone is well aware of Japan's struggles since 1990 and the terrible experience of the Great Depression.

     

    China GDP


    Meanwhile in the Far East, China's GDP came in at 7.4% year-over-year for the 1st quarter. Slightly below China's stated target of 7.5% and above many economist's estimate of 7.3%. So although slower than some of the hot years of the past, their economy continues to chug along, at least so far.

    In tonight's video we look at the market action and view all the BRIC countries also. In doing that we look at the MICEX index which tells us how investors are interpreting the impact of Ukraine on Russia's economy.

     

    In Focus

    In our video tonight we review another five Chinese stocks: HMIN, HTHT, JKS, MPEL and NTES.

    Stocks: HMIN, HTHT, JKS, MPEL, NTES
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