Daily Agenda: China Stocks Plunge as Lending Rate Spikes

Chinese markets sell off sharply; Merkel secures vote to limit refugee access; Sears reports mounting losses; Japanese pensions on equity buying spree.


A sudden slump in Chinese equity markets drove prices higher for safe harbor assets overnight. The Shanghai Composite Index closed down by 6.4 percent after a 14 basis point spike in the overnight repurchase rate sparked selling. Meanwhile, spot gold and futures for U.S. treasuries rose in sympathy. For investors hoping that developing market assets are nearing a bottom, confirmation remains elusive.

Sears losses mount. On Wednesday Sears Holdings Corp. released financial results for the fourth quarter with a new loss of $580 million, or $82 million on an adjusted basis, inside the high end of the guidance range provided by the retailer. Sales for the full year declined by 6.9 percent at the company’s Sears’s outlets versus 2014 while Kmart locations registered a contraction in sales of more than 7 percent. As the retailer, which is controlled by hedge fund manager Edward Lampert continues to hemorrhage money despite moves to cut costs and close stores.

Merkel secures bill limiting asylum. A bill supported by Chancellor Angela Merkel to tighten rules for refugees to enter the country was passed in a vote Thursday by Germany’s parliament. More than 1 million asylum seekers entered Germany last year, straining the nation’s social benefits system and raising fears over extremism among recent arrivals.

Japanese pensions load up on stocks. Data issued by Japan’s stock exchanges on Thursday indicated that the Government Pensions Investment Fund and Trust Banks purchased combined positions in local equities valued at nearly $4.5 billion last week. Some analysts have noted that public investors have been buying stocks rapidly in recent months after a decline in share prices.

More deflationary data from Europe. Eurostat consumer price data for January was revised downward Thursday from initial estimates, with the headline inflation rate lowered to 0.3 percent versus the prior reported 0.4. The revision adds more pressure on European Central Bank officials as they gather in two weeks to announce any monetary policy changes.

Fresh Sanctions readied for North Korea. On Thursday, a fresh round of sanctions against rogue state North Korea will be presented at the United Nations Security Council by U.S. officials. The proposed actions come after a recent series of missiles tests by Pyongyang that have reportedly alienated long-time North Korea ally China, which is a member of the Security Council.