Wednesday, August 19, 2009

China Closes Down, Spooks U.S.

It used to be that when U.S. markets sneezed, Asian markets caught a cold. Now it's the other way around:

World stocks sank Wednesday, with European indexes spooked by a 5 percent drop in China that strengthened fears stocks have become overpriced after this year's powerful rally.
(snip)

China's benchmark index has lost nearly 20 percent since Aug. 4 on worries about corporate profits, the strength of China's recovery and possible changes in Beijing's easy credit policy that has helped to fuel the bull run in Chinese stocks this year.


Dow and S&P 500 futures were down too; I expect Aug. 19 to be a down day for U.S. markets. This is the kind of news that illustrates how the world is changing, with China supplanting the U.S. as the nation to which the rest of the world turns for leadership. I look past the fact that China's stocks are down from their peak. That's why I'm holding FXI for a very long time.