{"id":3078,"date":"2016-02-17T21:09:26","date_gmt":"2016-02-18T02:09:26","guid":{"rendered":"http:\/\/162.223.13.186\/~zacksim\/is-china-spawning-global-deflation\/"},"modified":"2022-02-26T13:23:01","modified_gmt":"2022-02-26T13:23:01","slug":"is-china-spawning-global-deflation","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/is-china-spawning-global-deflation\/","title":{"rendered":"Is China Spawning Global Deflation?"},"content":{"rendered":"

Is China Spawning Global Deflation?<\/strong> Maybe not intentionally, but some of China\u2019s recent actions are putting deflationary pressures on global prices. A weaker yuan is allowing China to offload excess output in steel aluminum, refined petro-products and will likely spread to basic materials and manufacturing goods.<\/p>\n

Additionally, China has been shrinking cash reserves at a fairly rapid pace, with January\u2019s drop alone tallying $99.5B to bring their foreign currency reserves to $3.23T \u2013 the lowest level since 2012.<\/p>\n

The Fed Doesn\u2019t Want the Blame for Market Volatility<\/strong> \u2013 In a statement Wednesday, Janet Yellen seemed to concede that the economy is feeling the strain of late cycle growth pressures. She said that \u201cfinancial conditions in the United States have recently become less supportive of growth.\u201d She\u2019s likely referencing widening credit spreads, which can put a squeeze on bank lending, and the market volatility which generally makes everyone a bit uneasy. The Fed has made a habit of seemingly \u2018responding\u2019 to market volatility as though it is tied perfectly to their actions. Liquidity certainly plays a role in investment cycles, but it\u2019s not the end all. Yellen wanted to make that message even clearer to markets by stating that market volatility is a product of a shift in global growth expectations, not necessarily U.S. interest rate policy.<\/p>\n

European Banks Getting Slaughtered<\/strong> \u2013 Europe\u2019s bank situation is much different than the U.S.\u2019s when it comes to the Energy and oil story. Banks in Europe generally have around the same exposure to Energy and resource-sensitive loans as the U.S., but the difference is that Europe was much slower to recapitalize following the financial crisis. Since European banks generally have fewer assets than their U.S. counterparts, the Energy hit is harder on a relative basis. Even so, we don\u2019t see the impact as being enough to spur a credit crisis in Europe (which would be devastating now given the recovery is still very fragile), but we do understand the crisis in confidence that has emerged. As the commodities story continues to play out, these banks could continue to feel the sting. Most investors should be protected from the impact on banks \u2013 a well-diversified investment portfolio shouldn\u2019t have much European financial exposure at all.<\/p>\n

Crude Oil May Have Further to Fall<\/strong> \u2013 in a meeting over the weekend, ministers from Saudi Arabia and Venezuela discussed crude oil prices, but didn\u2019t talk too much about what everyone was hoping for: ways to provide price support<\/i>. Their message appears to be to maintain the status quo for production, with no potential cuts in the works. It may help matters that Iran has stated they are willing to cooperate with OPEC when it comes to production, but that doesn\u2019t mean a whole lot given that Iran just came online and will likely be reluctant to back off producing and selling. Supply is the big culprit in the price drop, and it doesn\u2019t appear as though measures will be taken to reduce it in the near future.<\/p>\n","protected":false},"excerpt":{"rendered":"

Is China Spawning Global Deflation? Maybe not intentionally, but some of China\u2019s recent actions are putting deflationary pressures on global […]<\/p>\n","protected":false},"author":1,"featured_media":4259,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,73],"tags":[],"class_list":["post-3078","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-client-group","category-steady-investors-week"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3078","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=3078"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3078\/revisions"}],"predecessor-version":[{"id":11448,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3078\/revisions\/11448"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=3078"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=3078"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=3078"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}