"People are  quite nervous about the Chinese economic outlook. China is certainly slowing on a very gradual path down. A lot of people are fearing a hard landing is in play."  Craig Erlam, of online currency broker OANDA, said: "The fact that we’ve still seen significant declines in equity markets suggests that sentiment remains very weak despite this stabilization in the yuan and more may need to be done to bring about a similar response. "The removal of the circuit breakers – which were ironically installed to shield against rapid market sell-offs but instead encouraged them – does appear to have brought some calm back but as we’ve seen over night, investors still clearly have no confidence in the markets and remain bearish." On Saturday official figures showed Chinese consumer prices picked up slightly in December but inflation remained about half the government's target. Prices paid at the factory gate, a guide to future inflation, also sank for a 46th consecutive month. The figures are the latest highlighting the weakness in China, which is expected to have grown in 2015 at its slowest rate in a quarter of a century. Investors extended losses from last week, which was one of the worst starts to a year on record with dealers rattled after trade was suspended twice in four days in Chinese markets. Shanghai ended the week about 10pc lower, in echoes of a sell-off that fuelled global turmoil in the summer. London lost 5.3pc over the week, Paris shed 6.5pc and Frankfurt dropped 8.3pc. And on Wall Street, the Dow and S&P 500 lost about 6pc, marking the worst opening week of a year in the history of either index. A series of cuts in the yuan currency's value to a five-year low against the dollar added to the sense of nervousness as Beijing stood accused of bungling its handling of the crisis. On Friday the central People's Bank of China sought to soothe nerves by pledging to carry out "prudent" monetary policy and work to ensure "reasonably abundant liquidity" in the banking system this year. Chinese equities have had a tough start to the year. This has flowed around the globe, kneecapping equities, where valuations were already deemed to be stretched," Mark Smith, a senior economist in Auckland at ANZ Bank New Zealand, said.

"A weaker inflation outlook and heightened market volatility has also swung the pendulum back to more policy support." The Chinese stock market is essentially valueless. If the Chinese Government wasn't propping it up behind the scenes the people who'd lost all their money would be out on the streets burning down CCP offices and lynching party members.

Opinion ....2...

Disaster was visited on the global economy 40 years ago with the Nixon 'shock' - the disengagement between the dollar and gold and other currencies with gold via their linkage with the dollar. That is the demise of the Bretton Woods agreement.
With the end of that arrangement countries were now free to create as much money as they liked and run as big a trade deficit as they liked. Under Bretton Woods, any trade defict had to be quickly reversed by cutting demand to maintain parity with the dollar and therefore gold
In 1963 Reginald Maudling tried to stimulate the UK economy only for UK business to fail to meet demand and so sucked in imports. That stimulus had to be quickly reversed. The same 10 years later with Anthony Barbour. The failure of Brits to create wealth goes back way before Margaret Thatcher. And way before GCSEs - but that's another matter.
Of course, Germany was the exception as the Bundesbank was not about to engage in this game of Monopoly.
Like all frauds, it starts small and the fraudster, having got away with it, then becomes more ambitious.
By 2007 the global economy had split into two camps - those who could create wealth, Germany (being smart and well-organised) and China (using slave labour) being the two prme examples, and those who could only consume wealth, the UK and US being the best examples. The US having exported a large chunk of its wealth creating capacity to the likes of China for the benefit of the few
The circle being squared with debt.
The Anglo-saxons convinced themseleves that crazy maths could be used to make even the worst debt perform.
In an attempt to maintain this farce from 2008 onwards the fraudsters now went one better by a quasi-monetisation of debt, quantative easing. Rather than solve the basic problem of not creating wealth they reach for their trusty tools of deceit and fraud.
Having got over the last few years with quasi-monestisation the UK, like all confident fraudsters, now becomes more confident and goes for full monetisation as Osborne claws back interest payments on bonds owned bythe BoE. One of the attributes of fraudsters is being adept at the use of convoluted logic to defy logic.
Eventually they will also write off the capital value of these bonds.
That gives a short breathing space but just as qe has solved nothing neither will that. The 'grand plan' seems to hope something will turn up.
But still there is this huge global trade imbalance that is being addressed by the default of everything just winding down as the there are fewer and fewer buyers for the sellers.

So, as a good socialist I transfer the debt to the average Joe

The vast majority of the EU states are socialist, so I believe, the main aim of socialism is to transfer wealth from those that have to those that have not to make it a fairer society.--- So as a good socialist I transfer the debt to the average Joe tax payer to protect the wealth of shareholders, bondholders and depositors. So Joe tax payer gets poorer and the rich get richer.---So I am a capitalist, I believe in a free market....Joe tax payer is protected for small amounts by the government i.e. all taxpayers. Its just insurance really Joe taxpayer has already paid for with his taxes. The bank goes bust free market forces. The shareholders, bondholders and wealthy depositors get stuffed. Wealth redistribution at a stroke with out the need for expensive tax collection and redistribution....I am sure all the educated people will tell me were I am going wrong....The wealthy by winning the competition have power to circumvent the market forces. So no pure market exists or is possible, and if ever it happened it would destroy itself in monopoly. It is even doing a good job of this at the moment without this 'purity'....Question - rhetoric : With so much continuing financial doom and gloom around Europe, the Euro and Spanish banks why have European stock markets followed far East markets and risen by more than 1% on opening this morning?. Is there something happening out there in the 'markets' that only a select few are aware of?... The ECB has  let the broader M3 money supply contract for the whole eurozone late last year, badly breaching its own 4.5pc growth target. This was not purist hard-money discipline. Let us not dress it up with the bunting of ideology, or false authority. It was incompetence, on a par with the errors of 1931.

Spain’s Bankia fiasco has merely brought matters to head, though the details are shocking enough. A €4bn bail-out in mid-May. A €23bn bail-out two weeks later. You couldn’t make it up.

Welcome back to my live blog, which will be covering the euro-zone leaders’ crucial meeting today where they will attempt to reach a definitive agreement to tackle the bloc’s spiraling debt crisis and market movements. There are worries that a deal will not be agreed, despite the urgency of the situation. The euro-zone leaders need to reach a deal on a second Greek bailout, including agreement on how much Greek bondholders will have to write off in so-called haircuts. They also need to confirm final details of a deal to boost the euro zone’s rescue fund–the European Financial Stability Facility. Meanwhile, the EFSF needs to be ratified today by the German parliament and Italian policy makers wrestle to come up with a solution to its debt mountain which satisfies both the EU and, perhaps more importantly, the markets.

The Italian Treasury paid higher yields Wednesday than a month ago to sell the planned €10.5 billion short-term debt, as markets remain tense over Italian political and economic prospects, and over the outcome of the European Union summit later in the day. The Treasury, which faces a further two debt sales this week, sold €8.5 billion in six-month Treasury bills and €2 billion of the September 2013-dated CTZ, a zero-coupon bond. It paid an average yield of 3.535% on the six-month T-bills, up from 3.071% previously. It paid a yield of 4.628%, up from 4.511%, on the CTZ. Demand was in line with previous auctions.
"The rising yields reflect increasing political uncertainty in Italy," said Tobias Blattner, director for economic research at Daiwa Capital Markets. "They also reflect uncertainty over tonight's summit, as hopes for a solution to the debt crisis seem now fading." Italy is at the forefront of euro-zone concerns with €1.9 trillion in debt, said Société Générale analysts. The country is facing simultaneous headwinds, including a cyclical slowdown which, in SocGen's view, will "almost certainly" lead to a recession in 2012 and 2013 and a structural loss of competitiveness, as well as an electoral system that prevents a clear-cut improvement in establishing economic policy.

LONDON—Europe's financial markets plunged after a volatile, nervy open Tuesday, following another wave of stock selling in Asia, with investors focused on the U.S. Federal Reserve's policy meeting later in the global day. To say that the market will be watching closely "would go down as a great under-statement," said analysts at Rabobank, especially given Fed chairman Ben Bernanke's belief that the effectiveness of past quantitative easing can be seen in the buoyancy of stock prices. By 0830 GMT, London's FTSE 100 index was down 4.8%, the CAC 40 in Paris was down 3.8% and the DAX in Frankfurt had lost 7%; all had risen soon after the open. Despite a torrid Asia session Tuesday, which saw the Nikkei 225 index in Tokyo end down 1.7%, there was some relief, especially in the Australian market. There, stocks made a dramatic recovery from over 5% down to close 1.2% higher, while the Australian dollar climbed off a four-month low of $0.9927 to $1.0167 at 0810 GMT. Traders said that some profit taking on short positions in Asia, in currencies such as the Australian dollar, had led to some buying of risk currencies in Europe. The euro was at $1.4233 at 0810 GMT, well above the Asian low of $1.4152. Elsewhere, yields on Italian and Spanish sovereign bonds fell further early Tuesday after the European Central Bank bought the bonds of both countries for the first time Monday and then did so again Tuesday. Spanish 10-year yields dropped to 4.995%, according to Tradeweb, 0.21 percentage point tighter versus safe-haven German bunds. Italian 10-year bonds tightened 0.20 percentage point versus bunds to yield 5.14%. The ECB was widely expected to maintain its presence in the market to stop Italian and Spanish yields drifting higher again.

Fears of "currency wars"

Fears of "currency wars" characterized by competitive devaluations and protectionism continue to dominate headlines in the run–up to the G20 summit in November. In our lead article this week, we examine Brazil's latest policy response to the appreciation of its currency. By raising the tax on capital inflows again, however, the government is unlikely to slow the Real's rise for long. China, too, remains central to the global debate over exchange rates. We focus on the record rise in the country's foreign reserves, a development certain to fuel further calls for revaluation, even though abrupt change is neither likely nor desirable.Elsewhere, French strikers are on the warpath over proposed pension reforms. With more austerity on the way, tensions between the government and the public could drag on. Nor is France, of course, the only country grappling with the consequences of belt–tightening. From Risk Briefing we feature a webcast with our UK analyst, Neil Prothero, who expects the cuts announced in the British government's spending review to hit economic growth.Industry Briefing looks at the rise of micro finance in Europe, which suggests that micro loans are not just relevant to borrowers in poor countries. Finally, Executive Briefing examines a refreshingly counter–intuitive social networking strategy, the idea of which is to connect with fewer, not more, people as a means of deepening relationships with customers.How do these issues affect your business? Please let me know at: arbitraj@aol.com