China cuts interest rates after sharemarket slide

28 Jun 2015 | Author: | No comments yet »

AUD/USD Weekly Fundamental Analysis – June 29 – July 3, 2015 – Forecast.

China’s benchmark Shanghai Composite index dropped by 7.4% on Friday, as hundreds of individual stocks lost 10%, the index’s daily downward limit.

The Shanghai Composite is now solidly in correction territory, having fallen 12% over the past five trading sessions as investors grow increasingly wary of a possible stocks bubble. Currency traders are “twiddling their thumbs” due to a lack of progress on Greece’s debt negotiations, OANDA Australia and Asia Pacific senior FX trader Stephen Innes said. Greece and its EU-IMF creditors have so far failed to break the stalemate in emergency talks to reach a bailout deal, raising fresh fears of a default by Athens that could send it crashing out of the euro.

One of the reasons that the market blow up we are seeing in China is so terrifying, is that 1) the market has already surged a lot (the Shanghai Composite had surged ~40% year to date, prior to last night’s pullback), and 2) a key driver behind the rally was the use of leverage.

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