TURMOIL has become a commonplace of financial markets in recent summers. This one is no different. An unexpected devaluation of the yuan this week fuelled fears about the state of China’s economy, setting off falls in commodities and emerging-market currencies. Stockmarkets in Europe and America wobbled. Copper hit a six-year low; oil is below $50 a barrel; Malaysia’s currency is at its lowest level since the Asian crisis in 1998. Even Canada is flirting with recession.
No single factor can explain everything that is going on. But two countries, and the relationship between them, provide a framework for understanding these gyrations. America is still the world’s biggest economy and sets the tone for interest rates and currencies globally. China has been the fastest-growing big economy by a distance. These two behemoths are pulling in different directions. America’s recovery is gradually gathering pace, while China’s economy is slowing sharply. This divergence is causing trouble, particularly for those emerging markets which have lived the high life on China’s investment boom and on a flood of cheap credit from America. And there is...
from The Economist: Leaders http://ift.tt/1TxslH0
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