Will China's malaise spread to the U.S. economy?

Strong U.S. employment growth stands in stark contrast to Chinese market woes.

Robert Johnson, CFA 11 January, 2016 | 6:00PM
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This week's market action was really all about China. The pain was widespread, as most equity markets were down 6%-9% since Dec. 31, 2015--drops that look more like monthly or even annual data.

As one might guess, China problems had the most knock-on effect on other emerging markets, which were down 9%. Europe and the U.S. were both down about 6%. With new fears out of the Middle East and colder weather in the central U.S., commodities did the best of a very bad lot, falling "just" 4%. Of course, safe-haven bets and slower world growth outlooks drove the interest rate on 10-year U.S. Treasuries down from 2.27% to 2.13% since the end of 2015, making bonds the only real winner this week.

Data out of China indicated that the Chinese economic malaise hasn't been broken. And like the oil industry, the China issue will probably be modestly worse than expected and last longer than thought just a few months ago. There's no quick rebound in the cards, either. That fact was driven home by a pair of purchasing manager reports that resumed their declines in December after a couple of more promising months.

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Robert Johnson, CFA

Robert Johnson, CFA  Robert Johnson, CFA, is director of economic analysis for Morningstar.

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