China fears, global growth doubts grip markets

Mon Aug 24, 2015 4:13am EDT
 
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By Sarah White

MADRID (Reuters) - Markets are watching for China's next move as signs of a slowdown in the world's second-largest economy stack up, raising expectations it will act to stoke growth.

A looming snap election in Greece and a closely watched conference hosted by the Federal Reserve in the United States are also likely to keep investors on their toes in the coming week, in particular as they look for hints on when the U.S. will raise interest rates.

Fears that Chinese growth is weakening, dragging down the global economy with it, are hammering commodities and stocks.

Alarm bells rang out across world markets on Monday as a 9 percent dive in Chinese shares and a sharp drop in the dollar and major commodities panicked investors.

On Friday, a survey showed Chinese manufacturing slowed the most since the global financial crisis in 2009 - adding to other worrying clues about the country's health, including its falling exports.

China devalued the yuan earlier in August by pushing its official guidance rate down 2 percent. The central bank has said there was no reason for the currency to fall further, but investors are also bracing for further interest rate cuts.

"It will be all eyes on the Chinese authorities for any further policy support steps, alongside the People's Bank of China yuan fixings and trading swings," analysts at Investec Economics said in a note to clients.

China is also widely expected to relax reserve requirements ratios for its banks again in the coming months, a measure intended to spur lending by reducing the cash they need to hold. It is trying to keep its economy on course to grow 7 percent in 2015 - its slowest pace in a quarter of a century.   Continued...

 
A trader works inside a booth on the floor of the New York Stock Exchange, August 21, 2015. REUTERS/Brendan McDermid