Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Slowing Global Growth May Derail The Bull Market

By Michael KramerMarket OverviewNov 05, 2021 11:37
uk.investing.com/analysis/slowing-global-growth-may-derail-the-bull-market-200501656
Slowing Global Growth May Derail The Bull Market
By Michael Kramer   |  Nov 05, 2021 11:37
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

This article was written exclusively for Investing.com.

Sometimes when investors are so focused on one event, they miss the big one staring them right in the face. The manufacturing sector in China has been contracting for two months, based on the China Manufacturing PMI. This slowdown seems to have gone unnoticed by US equity markets.

The weakness is not only noticeable in the PMI. Iron ore futures have plunged by nearly 50% since the middle of July, while the Baltic Dry Index has fallen by almost the same amount in only four weeks. Additionally, commodities like soybeans have fallen nearly 25%. Whatever is driving this weakness in China, the fact is that something is happening outside of the world of inflation, and, at the end of the day, it may end up carrying more weight.

China Manufacturing PMI
China Manufacturing PMI

Ignoring The Risks

Given the collapse in some of these key commodity prices and shipping rates, it seems growth in the second-largest economy is slowing. An article in the South China Morning Post recently noted new downward pressure facing the economy. This is very important, given that China is the world’s second-largest economy and any slowdown there is likely to have a ripple effect across the globe.

However, the US markets have largely not even taken any notice. Since the middle of October, the S&P 500 has been on a massive risk-on rally, climbing to yet another new all-time high. Instead of noticing the weakening growth trends, it has remained focused on the risk of rising inflation rates and the need for the Fed to taper its asset purchases.

Watching Inflation

While inflation has been a persistent problem worldwide, the question is if it will remain persistent. With most of the problems coming from the supply side, one would think that those prices would adjust and stabilize over time as supply becomes available.

As a result, yields on the short-end of the curve have risen sharply due to these short-term inflation pressures and yields on the long-end of the curve have moved sideways. It would seem to suggest that the longer-end of the bond market is worried about long-term growth prospects more than short-term inflationary challenges.

This slowing of the Chinese manufacturing sector may even be what the US yield curve is starting to reflect and related to slowing global growth. Even Germany saw retail sales fall by 2.5% month-over-month for September, while its manufacturing PMI came in weaker than expected and slower than last month.

Germany Manufacturing PMI
Germany Manufacturing PMI

When Will It Realize?

While the US markets appear not to be paying attention to any of this, one thing is clear, Asian markets are, with places like South Korea seeing its KOSPI fall by about 10% from its highs, and the market in Taiwan down about 5% and trending lower since the middle of July. Additionally, the market in Australia has trended sideways since June.

The warning signs seem to be growing, and the more prices of crucial commodities fall, the more significant and more glaring the signals become. Ultimately, it may only be a matter of time before US markets wake up to the warning of a global growth slow down. To think, just as the Fed begins to taper.

Slowing Global Growth May Derail The Bull Market
 

Related Articles

Slowing Global Growth May Derail The Bull Market

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (5)
Mohammed masih uddin
Mohammed masih uddin Nov 06, 2021 14:19
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Good analysis.Due to high inflation dollar index should comedown but its going upwards.
devendra patel
devendra patel Nov 05, 2021 17:07
Saved. See Saved Items.
This comment has already been saved in your Saved Items
good thought but equities can remain irrational for quite sone time.
Vincenzo Dellboy
Vincenzo Dellboy Nov 05, 2021 14:25
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Excellent article as always Michael.
Drake Richards
Drake Richards Nov 05, 2021 13:41
Saved. See Saved Items.
This comment has already been saved in your Saved Items
and no one has seen this except you
Drake Richards
Drake Richards Nov 05, 2021 13:41
Saved. See Saved Items.
This comment has already been saved in your Saved Items
and no one has seen it except you
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email