Tuesday 10 November 2015

Markets fall, China faces deflationary pressure

Markets fell on Monday.

The S&P 500 fell 1.0 percent while the STOXX Europe 600 fell 1.1 percent.

Earlier on Monday, the Shanghai Composite Index did manage to extend its rally for a fourth consecutive day though, rising 1.6 percent.

Commodities were weak, the Bloomberg Commodity Index falling 1.2 percent. West Texas Intermediate crude for December delivery declined for a fourth day, falling 1 percent.

Indeed, data out of China on Tuesday indicated deflationary pressure.

China's consumer price index rose 1.3 percent in October from a year earlier, down from 1.6 percent in September. The producer price index fell 5.9 percent, its 44th consecutive monthly decline.

"The risk of deflation has accentuated," said Liu Li-Gang, the chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. "This requires the PBOC to engage in more aggressive policy easing."

Less certain is Zhu Qibing, an analyst at China Minzu Securities Co. "But this year, the effectiveness of monetary policy in boosting demand has been limited," he said. "So even if the central bank has room, it may not cut interest rates again until next year."

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