Stocks and exchange traded funds (ETFs) stumbled this morning after a few rounds of bad news: China raised reserve requirements on its banks for the second time in a month, U.S. exports are being hit by a stronger dollar and the Eurozone had almost no growth in the fourth quarter. Ouch.
In an effort to keep growth manageable, China forced its banks to reduce lending and increase reserve levels. The move was a surprise to the markets because it comes on the heels of a report showing that inflation is being kept in check, reports the Associated Press. China is very concerned about containing the country’s economic growth and wants to prevent speculative bubbles. iShares FTSE/Xinhua China 25 (NYSEArca: FXI) is down more than 2% today. [More on China’s Economy.]
Retail sales in January were up 0.5%, an increase that surprised economists. On the flip side, though, is that consumer confidence fell from a two-year high, say Bob Willis and Courtney Schlisserman for Bloomberg. The gain in retail sales was the third improvement in four months. SPDR S&P Retail (NYSEArca: XRT) is down slightly today. [Read on for More on Retail.]
The eurozone economy all but stopped in the fourth quarter, growing by only 0.1% from the prior quarter and falling 2.1% from the previous year, reports The Wall Street Journal. Since growth was practically nil, the European Central Bank isn’t likely to raise interest rates or pull back on stimulus measures, analysts say. iShares MSCI EMU Index (NYSEArca: EZU) is down more than 1% so far.
The U.S. dollar is perched at eight-month highs, which is causing some concerns about what the dollar’s strength would do to the economic recovery. If the dollar gets stronger, exports could slow and American corporations will find it challenging to sell goods and services in other countries, says Rachel Beck for the Associated Press. On the other hand, though, it will make imports cheaper – something American consumers will undoubtedly appreciate. PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP) is up about 0.3% so far today. [Read on for More About Currencies.]
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.