In today’s Tip TV Finance Show, we discuss the key topic of the week ‘divergence’, the China and India growth story, and ECB crushing the financial market foundation, with Bill Blain, Strategist for Mint Partners.
Good time to be in markets?
Blain says that we are seeing a different market at present, with news-flow playing a decisive role into how markets are evolving.
Divergence is the word
Blain outlines that the ‘divergence’ story is the key theme for this week, with the ECB set to ease, Australia and India holding rates unchanged, and the Fed likely to hike US rates later this month. All of this combined with the sad Chinese manufacturing data and the strong expectations for US nonfarm payrolls is adding to the investor confusion, with old correlations not working, and liquidity being squeezed out of the markets.
China surprised in 2015; Disappointment ahead in the India story
Blain looks at China and the Indian growth stories, noting that he isn’t convinced on the growth story, and disappointment will likely creep in 2016.
He adds that China has evolved enormously and tacked massive problems to successfully climb the path of industrialization, and creating a middle class from the poor population, while India failed to the same to a similar extend. China faces a big problem in the transition from industrial led to consumption led growth, while in the case of India, the noise and fuzziness around the same equation is making it more difficult.
More ECB QE unlikely
With the ECB rate decision out on Thursday, Blain sees less chances of Draghi pushing for additional QE, with the Germans against it. Blain does expect the Eurozone central bank to cut rates and bring down the euro.
Blain adds that the ECB’s action are crushing out the foundation of the financial markets and wiping out money markets.