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A Blip on Global Markets' Recovery


By Paul Goodwin, Analyst and Editor of Cabot China & Emerging Markets Report
From Cabot China & Emerging Markets Report Special Bulletin 3/11/10 

Relatively mild news from closely watched markets can produce exaggerated reactions. That’s what happened today when China reported that its Consumer Price Index (CPI) for February was up 2.7% (year-over-year). The January CPI increase was 1.5%. Investors see the higher inflation number as increasing the probability that the government will raise interest rates and move to tighten lending. And anything that threatens to slow down the Chinese economic engine is cause for alarm. On the upside, the inflation numbers may nudge the government toward allowing the yuan to appreciate against the U.S. dollar. Taken as a whole, it doesn’t amount to much, and today’s correction is likely just a blip in the global markets’ continuing recovery.

The Halter USX China Index, which has just soared from 5,400 to 5,600 (its resistance level in November and December), is comfortably above both its 25- and 50-day moving averages. This keeps our Cabot China-Timer positive and gives us a cushion in case some retrenchment occurs. It’s a healthy situation.

The Chinese inflation numbers mentioned above put a brick on the market’s head for much of today. The major indexes trading flat all day long and finished the day with fractional percentage gains. The Dow advanced 45 points (0.4%), while the Nasdaq gained 10 points (0.4%) and the S&P 500 edged up 5 points (0.4%).  The Halter USX China Index slipped 8 points (0.1%).

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