Italy 1.37% -1bp Spain 1.11% -1bp Portugal 3.21% +2bp Germany 0.004% -3bp Greece 8.44% flat Europe’s bond markets were obviously hanging out for some taper talk as they’ve been up and down today. German 10’s were as high as 0.070% but have since fallen back and had posted a -0.001 low.
In recent days, China has been hit with a tripple whammy of rising inflation, reducing the likelihood of more monetary easing; a jump in the dollar which has pressured the Yuan sending it to its lowest fixing since 2010 at 6.7379, while the USDCNH rising above 6.75 in early trading; and rising interest rates which have resulted in another spike in revulsion to EM stocks. Perhaps as a result of this perfect storm of catalysts, overnight China’s foreign currency shares, the Shanghi B-share index, plunged the most since January in late trading, and as Bloomberg notes, “sending traders scrambling for reasons to explain the sudden volatility in a largely moribund market.”
The Shanghai B-share index of dollar-denominated stocks suddenly crashed as much as 6.7%, the biggest drop since January 11, with virtually all the losses coming in the last 90 minutes of trading, before closing down 6.2%.
Kama Co. and Shanghai Lingyun Industries Development Co. were among companies falling by the 10% limit. Predictably, a measure of the 10-day volatility on the 52-member index jumped to its highest level in six months, after falling in September to its lowest in at least a decade.
As Bloomberg summarizes, B-share markets, where foreign institutions and Chinese individuals are allowed to trade, were set up in 1992 to give local companies a way to raise funds from global investors banned from buying securities denominated in yuan. Interest in B shares has waned as the government allowed qualified overseas investors to access the larger, more liquid A-share market and eased limits on foreign exchange. Monday’s drop came as the yuan extended a slide against the dollar to a six-year low.