Stocks slumped late last week after the Dow reached record numbers, due in part to Chinese statistics showing lower than expected gains. Government data showed China’s industrial production only rose 9.9 percent in January and February. Analysts in a Bloomberg survey said they projected a 10.6 percent growth. Separate figures showed retail sales in China rise by only 12.3 percent, which again failed to reach projected marks.
U.S. stocks recovered this afternoon as Standard and Poor’s 500 Index approach record highs and U.S. market volatility approaches its lowest level in almost six years. Still, many are concerned by China’s lower than expected industrial production and consumer spending. According to Reuters UK, Chinese inflation in February was at a 10-month high, and policymakers are faced with a “looming dilemma” as to how to best address the economic cool off.
Here are Wall Street Journal and Bloomberg Businessweek articles talking about the Chinese impact on U.S. stocks:
http://online.wsj.com/article/BT-CO-20130311-705925.html
http://www.businessweek.com/news/2013-03-11/u-dot-s-dot-stock-futures-little-changed-kroger-peabody-drop
And here’s the article from the U.K. perspective from Reuters:
http://uk.reuters.com/article/2013/03/11/markets-usa-stocks-idUKL1N0C30OK20130311
Be careful in reading explanations of the “noise” in financial markets. This is the “…and the sun rose today…” issue: journalists have to crank out a story every business day. Attributing the change to a cause as indirect as one statistical indicator in China seems a stretch.
On a substantive basis, what are the links between the US and the Chinese economy? The IMF publishes a Spillover Report that tries to gauge the causal chains and likely magnitudes – the link here is to the 2011 report, subsequent updates are subsumed in a “master” spillover report that also covers the impact on others of problems in the Euro Zone and so on.