Daily Agenda: Chinese Markets Sell Off Sharply

Euro zone sentiment data improves; global bond fund outflows continue; Oddo & Cie unveils bid for BHF Kleinwort Benson Group.


Kevin Lee

U.S. investors return to work this morning after a holiday break to find global financial markets in a reactive mode. The Shanghai Composite Index declined by over 5.5 percent in trading today as sentiment was shaken by weak economic data and news of more regulatory probes of securities firms by Chinese authorities. Meanwhile an abrupt pullback by the Swiss franc versus the dollar and euro in trading this morning has led to speculation that the Swiss National Bank has intervened to blunt appreciation in the face of expected European Central Bank easing measures next week. With commodity markets also coming under pressure today, investors once again appear willing to pay for security, with German two-year sovereign notes hitting a record-low yield of –0.0426 percent.

Japanese economic data mixed. November inflation data from the Statistics Bureau showed no significant change in consumer price levels for October while overall household spending contracted by 2.4 versus the same month in October. Meanwhile, the headline unemployment rate was reduced to 3.1 percent from a prior 3.4 percent, according to figures released today by the Japanese Ministry of Health, Labor and Welfare.

Mood improves in Europe. Euro zone economic confidence data released Friday by the European Commission included a four-year high reading of 106.1 for the headline index in November. Consumer confidence rose sequentially to –5.9 for the month while both industrial confidence and business-climate segments slid lower than October readings.

Greek GDP contracts sharply. Gross domestic product figures released today by the Greek National Statistics Service confirmed that the economy contracted in the third quarter with headline GDP registering at –1.1 percent annualized. Greece now has two weeks left to complete the 13 key reforms dictated by creditors to receive the next $1 billion aid tranche in December.

French bank announced bid for asset manager. French investment bank Oddo & Cie revealed a $805 million bid for Belgian asset management firm BHF Kleinwort Benson Group today. As part of the proposed merger, some assets would be sold to Société Générale. Chinese company Fosun International had made an earlier bid for BHF.

Investors shift allocations ahead of year-end. A report issued this morning by Jefferies quantitative strategist Kenneth Chan concludes that with more than half of the fourth quarter now complete, investors have been steadily withdrawing their investments from global bond markets while lifting their shares in money markets and to a lesser extent, in equity and commodity markets. Over the past week, global money markets recorded a net inflow of $6 billion while equity markets picked up $1.5 billion as bond investments shrank.