Morning Market Update July 25: China Weighs on Global Markets

July 25th, 2013 by

Gold started the day in New York nearly flat from Wednesday’s close, as spooked speculators and thin volume lead to moderate losses in late U.S. and Asian trading yesterday. Silver, which avoided the late afternoon dip in New York yesterday, was hit with a moderate dip near the close of Asian trading, but recovered handsomely to also start the New York trading day flat.

The slowdown in China’s economy, and fears thereof, continues to weight down markets across the globe. Everything from copper and oil to corporate earnings forecasts are bearing the weight of the deceleration of the world’s second-largest economy.

The dollar is slightly weaker this morning, helping precious metals, but oil futures are also lower on the prospect of diminishing demand from China.

In Asia, the Nikkei fell 1.1% as Canon slashed earnings forecasts, while Chinese mainland stocks dropped .6% despite the government’s pledge to help exporters and to fast-track high speed rail projects. Hong Kong stocks dipped for the first time in five sessions, shedding .3%

Euro stocks dropped .66% on profit taking after a 10% rally over the last month. Investors were also reducing their exposure to companies with a strong dependency on China.

Stocks are set to open lower on Wall St. amid expectations of a third day of losses, again driven by China concerns. This despite strong earnings announced by GM, Starbucks, and Dow Chemical, and the news that durable goods orders increased more than expected.

Even though there isn’t any really big news to drive the markets, the thin volumes mean that any movement is going to be exaggerated. As the month of July wraps up, traders, especially in Europe, will be putting their accounts in a holding pattern while they are away on summer vacation, meaning even less volume in the weeks ahead.

by David Peterson