This is not good (thank you Captain Obvious). The New York Stock Exchange aka NYSE has suspended trading. This on top of a runway halt earlier today for all United flights–this essentially grounded their flights. Websites for Zero Hedge and the Wall Street Journal also were down for a period. Are these events related?
So far, no one is running for the lifeboats. What is very revealing is that trading of stocks in other venues continues and the market is not panicked. In other words, the influence of the NYSE is very over-rated.
What ought to be keeping you awake at night are the events unfolding in China. Their stock markets are in free fall. Trillions of dollars, not billions, but TRILLIONS have been lost.
China’s tumbling stock market showed signs of seizing up on Wednesday, as companies scrambled to escape the rout by having their shares suspended and indexes plunged after the securities regulator warned of “panic sentiment” gripping investors.
Beijing, which has struggled for more than a week to bend the market to its will, unveiled yet another battery of measures to arrest the sell-off, and the People’s Bank of China said it would step up support to brokerages enlisted to prop up shares.
The CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen closed down 6.8 percent, while the Shanghai Composite Index .SSEC dropped 5.9 percent.
With nearly half the market on a trading halt and another round of margin calls forcing leveraged investors to dump whatever shares could find a buyer, blue chips that had been supported by stabilization funds earlier in the week bore the brunt.
“I’ve never seen this kind of slump before. I don’t think anyone has. Liquidity is totally depleted,” said Du Changchun, an analyst at Northeast Securities.
When you “deplete” liquidity you essentially freeze economic activity. All of these events have good and bad consequences. For example, the collapse of prices in the Chinese stock market hurts people who bet their extra cash in hopes of reaping profits. That money is now gone. If the source of that money originally came from loans then you will see a fairly dramatic contraction of the Chinese economy. You need cash and credit to buy cars, autos, furniture, fuel and food. On the plus side, Chinese products will be cheaper.
And guess what? Chinese auto sales are way off:
An increasing number of car buyers in China are canceling their purchases and risking forfeiture of their down payments after a stock-market rout that has erased about $3.2 trillion in value, according to Cui Dongshu, secretary-general of China’s Passenger Car Association.
“The plunging stock market is essentially a meat grinder, shredding money meant for buying cars,” Cui said in a phone interview. Auto sales fell last month for the first time in more than two years, according to figures released by the group Wednesday.
China has been the engine helping keep the world economy moving forward. The US economy, despite the delusional claims of Obama, has been stagnant and, according to recent indicators, shrinking. It is not a cause of celebration to create 230,000 new jobs when you are also shedding 430,000 from the labor pool.
The earthquake in China overshadows the tremors in Greece and Europe. More liquidity problems there. While the Greek economy is tiny in the global scale, it becomes one more drag on the global economy.
And then we still have the Iran effect to look forward to. What do I mean? Once the nuclear deal with Iran is in place (and that should happen in the next week), Iran will be free to export oil. That means increased supply of oil at the same time that demand for oil is decreasing. What happens to price? Price drops.
For now, Obama and other financial leaders are acting like Leslie Nielsen from Police Story:
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