Tuesday, 5 June 2007

Another China plunge, another shrug

Investors are beginning to have a better understanding of the significance of events in China's stock market.

Yesterday, Chinese stock markets plunged. Outside China, though, almost nobody cared. AFP/CNA reports:

Chinese share prices tumbled 8.26 per cent Monday for the sharpest drop in more than three months on concerns the authorities will take more measures to cool a speculative frenzy, dealers said...

While the February drop triggered panic in stock markets around the globe, Monday's plunge in China shares met with a relatively muted response in Asian markets, with Australia and South Korea reaching new highs.

And MarketWatch reports that US stock markets also closed at new highs yesterday.

David Gaffen at MarketBeat says that China's stock market "just isn't that big". Nevertheless, Helen Thomas at FT Alphaville thinks that the "the soap opera of Beijing’s attempts to grapple with its red-hot stock market is too good to ignore".

On the economic news front, Bloomberg reports that spending by Japan's largest companies rose to a record in the first quarter.

Capital spending climbed 13.6 percent in the three months ended March 31 from a year earlier, the Ministry of Finance said in Tokyo today. The pace was faster than the 10.1 percent median estimate of nine economists surveyed by Bloomberg News.

But in the US, factory orders disappointed, as Reuters reports.

New orders at factories rose a smaller-than-expected 0.3 percent in April, the weakest showing since January, on a sharp drop in aircraft orders, a Commerce Department report showed on Monday.

Analysts polled by Reuters were expecting factory orders to rise 0.7 percent. March orders were revised up to show a 4.1 percent gain from the previously reported 3.1 percent...

Excluding transportation, factory orders rose 0.7 percent after a 2.4 percent increase in March.

Orders for durable goods, long-lasting items meant to last three years or longer, were revised to show a bigger-than-expected 0.8 percent. Durables orders were previously reported to have risen 0.6 percent, and analysts polled by Reuters had expected the durables figure to stay unrevised.

In a sign businesses are continuing to invest, orders for capital goods excluding defense and aircraft, considered a proxy for business spending, were revised to an increase of 2.1 percent after a previously reported 1.2 percent gain.

In the euro zone, inflation remains a concern as Eurostat reports that industrial producer prices rose 0.4 percent in April.

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