Kings of the East

CHINA SYNDROME: Will Beijing’s ailing economy drag us all down?


Here’s the dirty little secret: The entire world’s economic health is tied to both China’s and the United States’ economies, which are tied to each other. As either economy goes, so the rest of the world goes.

“U.S. stocks were poised for a slightly lower open Friday, rounding out a week marked by fears about a cooling Chinese economy.

Investors on Friday received fresh evidence of the slowdown in the world’s second-largest economy. An early gauge of China’s factory activity slumped to a six-and-a-half year low in August, triggering steep declines in stocks across Asia and Europe, where many companies depend on China for demand.

U.S. stock futures indicated a 0.2% opening loss for the S&P 500 and a 0.4% opening loss for the Dow Jones Industrial Average. Changes in futures aren’t necessarily reflected in market moves after the opening bell.

Declines in European stocks were bigger. France’s CAC-40 lost 1.1% and Germany’s DAX slipped 1%.

U.S. stocks fell sharply on Thursday, with the Dow tumbling nearly 360 points to its lowest level since October.

The downbeat tone to stocks continues to be driven by “the uncertainty and speculation about the pace of global growth and what might the Fed do in September,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. Minutes from the latest Federal Reserve meeting showed officials remain divided on whether to raise rates next month.

Mr. Sandven noted that the renewed Chinese growth scare came as U.S. companies have largely finished reporting second-quarter earnings, giving investors little else to focus on. Including results from 484 companies in the S&P 500, earnings are on track to slip 0.6% in the second quarter, according to FactSet.

Hewlett-Packard Co. reported a 13% drop in quarterly profit. Revenue fell 8%, marking the 15th decline in the past 16 quarters. The results were H-P’s last before its planned breakup on Nov. 1. Shares lost 0.2% premarket.

Foot Locker Inc. posted a better-than-expected 29% jump in profit amid broad-based sales growth. Shares rose 2% premarket.

In commodity markets, gold futures were nearly flat at $1153.20 an ounce. Crude-oil futures fell 0.9% to $40.97 a barrel.

Treasury prices were little changed, with the 10-year yield at 2.082% versus 2.084% on Thursday.”


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