“Aunque los programas de gasto y los recortes de tasas podrían proporcionar algún alivio, la confianza en su eficacia está disminuyendo”, escribió Bank of America Merrill Lynch.
News Yucatan
NEW YORK (CNNMoney) - Everyone has bad dreams. Lately, the nightmares of Wall Street always seem to involve chaos in China.
Rather than by falling oil prices, the strong US dollar, the turmoil in Greece or a rate hike by the Federal Reserve, investors remain concerned about China; and for good reason.
Concerns about China intensified this week after the country shocked the world by devaluing its currency.This scene brought the specter of a global trade war or the idea that Beijing is panicking because of a more severe economic slowdown than expected. Chinese officials had already spooked global investors with its stern to the fall in stock prices earlier this summer answer.
"Could it be you do not really know what they are doing? I believe that, and I think that is starting to get seriously unnerved investors around the world, "wrote Ed Yardeni, president of Yardeni investment advisory Research, in a note to clients.
The biggest reason why China matters is the size. Unlike Greece, Puerto Rico or other exceptional situations, China has enough scale to impact the world.
It is now the second largest economy in the world, surpassing Japan and Germany in recent years. China is also the largest consumer of commodities such as oil and copper, which have plunged in recent weeks.A more dramatic drop in Chinese growth could cause commodities to collapse further, unleashing financial chaos in countries that depend on these natural resources.
"That could result in a debt crisis somewhere in the world. In other words, the chaos of China may be about to provide more than enough critical mass to a global crisis, "Yardeni said.
The engine of growth has stalled
For much of the past 15 years, China has served as a key catalyst for global growth. But China's economy is maturing and growth has slowed from 10% in 2010 to only 7% in the first half of this year.
"Investors see China as this magical economic utopia where things up three times the amount we see in other nations, and that it will forever," said Sam Stovall, chief investment strategist at S & P Capital IQ.
Some positive time, the exhibition China is worrying now
But now reality has arrived and is creating headaches for companies with significant exposure to China.That includes American multinationals such as Apple, General Motors, Nike, Starbucks and the owner of KFC, Yum! Brands.
"Whereas before exposure to China was a source of optimism and significant potential for US stocks growth, now has become a source of disappointment in recent results, from televisions to cars and iPhones and machinery", wrote analysts Bank of America Merrill Lynch in a report.
A strong dollar is great for American tourists traveling abroad, but can be a problem for companies based in the United States. When the dollar gains over their rivals, that expensive products sold abroad.
The impressive rally of the greenback in the last year received even more momentum for China's decision to devalue its currency. That is one reason why Wall Street shares fell earlier this week in a surprise move.
Deflation could be exported to the US
The slowdown in China is putting downward pressure on prices in that country.
Wholesale inflation has declined at an annual rate for 41 consecutive months through July, according to Yardeni. That's not healthy.
The concern is that deflation something for which there is no solution can easily spread from China to other countries. That has already caused prices of raw materials such as metals and oil to decline. If signs of deflation emerged in the United States, the Federal Reserve would have to delay or reduce their plans to raise interest rates.
"Inflation is the missing piece in the United States. Yet is close to the target of the Fed. You have a move like this, and that revives the threat of deflation, "said Nicholas Colas, chief market strategist at ConvergEx.
Investors do not trust China
"It's like the Wizard of Oz: much of this is done with smoke and mirrors behind the curtain," Stovall said.
And recent moves by China are not helping. To the dismay of Western investors, the Chinese government helped inflate the bubble in the stock market and later adopted an overly aggressive approach when prices fell. And then the devaluation came out of nowhere.
Beijing risks offending more than just investors. Future efforts to revive growth are likely to be greeted with more skepticism from the markets.
"Although spending programs and rate cuts may provide some relief, confidence in its effectiveness is decreasing," wrote Bank of America Merrill Lynch.