China market down as traders digest a week of news

China’s market has been closed for a week so it comes as no surprise to see a sell-off in Chinese stocks as soon as Shanghai opened on Monday.

China’s market has been closed for a week so it comes as no surprise to see a sell-off in Chinese stocks as soon as Shanghai opened on Monday. The major Chinese indexes were down over 3% as traders sold stock and ignored a recent cut by the People’s Bank of China, the country’s central bank, in banks’ reserve requirement ratios. Chinese investors were primarily reacting to a week’s worth of news and data, and they have a lot to digest, including the prospect of a slowing and maturing economy and a bubbling trade dispute with the United States. China is moving towards a more mature economic model from the one that has driven its remarkable growth in the last 20 years and experiencing growing pains in the process, but the Shanghai market, although still representative of a relatively small proportion of the Chinese economy, is being more closely watched by traders across Asia – witness Hong Kong’s Hang Seng down 1.2% and Singapore’s STI down 0.7%.

Schroders and Lloyds in possible tie up

In early trading in London, the FTSE 100 was down 0.34% this morning. Schroders, bucking the trend, was trading up over 1% on news that broke over the weekend of a possible wealth management tie up with Lloyds Bank. The deal is being valued at more than £13 billion and would represent a major alliance within the UK and international wealth management sector. At the time of writing, both parties had confirmed that they were in discussions, but exact details had not been disclosed. It would be good news for Schroders if they can conclude an alliance with Lloyds, as the bank brings with it a highly valuable retail distribution network for the fund manager. If there is one thing fund managers gripe about consistently, it is lack of access to good distribution, and this deal would fix that for Schroders. The fund manager has already ear marked wealth management as an area for future growth – the addition of a massive £109 billion investment management contract from Scottish Widows would be the icing on the cake, if it could be achieved.

Bond market takes a rest from being in the driving seat

It is a slightly unusual day in store for US markets, as the bond market is closed in observance of Columbus Day. The stock markets will still be open, but traders will not be able to reference the bond data that was very much in the driving seat for US traders last week. On Friday we saw the yield on the benchmark US 10 year Treasury note hit a seven year high. Traders are currently expecting a more aggressive stance from the Federal Reserve than seen previously, following “we’re a long way from neutral” remarks made by Fed chair Jerome Powell in an interview last week. The direction of US bond yields is likely to remain a big factor in US traders’ considerations this week: last week the NASDAQ had its biggest single week decline since March, off by 1.16% by close on Friday. This reflects a more traditional view by investors that, if the risk free rate is on the up, then there is less reason to be in equities. Traders will be watching the Fed like hawks this week.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.