China is showing signs of weakness, an ominous sign for the global economy:
China 1-year government bond yield ⬇️
China large-cap ETF ⬇️
Copper price ⬇️ pic.twitter.com/oQA1uNfnsj
— Game of Trades (@GameofTrades_) July 11, 2023
China’s $77 Billion Bank Rout Shows Who Pays Price for Rescues
A Bloomberg Intelligence stock index of Chinese lenders has tumbled 14% from this year’s high in May, erasing $77 billion of market capitalization and leaving the industry’s shares on the cusp of their lowest-ever valuations. Already under pressure from China’s monetary loosening and tepid demand, banks are facing renewed scrutiny after authorities asked the sector to extend debt relief to developers as the nation’s housing crisis continues. Some Wall Street analysts also have turned cautious, with Goldman Sachs Group Inc. taking a bearish view on the industry, a move that drew a rare rebuttal from a state-run Chinese newspaper last week.
Stress Is Building in China’s $12 Trillion Onshore Credit Market
Stress domestically rose to level 4 in June from 3, Bloomberg’s China Credit Tracker shows, the highest since February. The gauge indicates rising levels of financial strain via a band from 1 to 6. The worsening was caused largely by a pair of builders failing to make a combined 4.4 billion yuan ($608 million) of bond payments, the largest monthly total this year. Other setbacks have included large domestic banks halting purchases of local notes sold in the Shanghai free trade zone. Local-government financing vehicles, the main issuers of such debt and whose debt is a growing risk for China’s economy, could face liquidity tightness from having to seek alternate financing channels.
Bankruptcy filings by larger corporations in the first half of this year rose to the highest level since the same period in 2010, when they were coming down from the Financial Crisis ⚠️⚠️⚠️
Source: wolfstreet pic.twitter.com/bfDcwI2W3v
— Wall Street Silver (@WallStreetSilv) July 11, 2023
Housing is a key predictor of real GDP growth
Among various GDP components, housing weakens the most in the year before a recession pic.twitter.com/EuGCmvAgmW
— Game of Trades (@GameofTrades_) July 11, 2023
Citigroup Downgrades US Stocks Amid Recession Risks
Citigroup on Monday downgraded U.S. stocks in anticipation of a pullback in growth stocks and a recession in the fourth quarter of the year, while betting on beaten-down counterparts in Europe with an upgrade. The brokerage cut its rating on U.S. stocks to “neutral” from “overweight”, following a strong rally in the first half of the year. It warned that growth stocks were set for a pullback as the “euphoria” around artificial intelligence enters a more “digestive” phase.