Last week a downgrade in Spain’s credit rating helped sink oil. Overnight it was a report on Chinese manufacturing that did the deed. Last Friday, ahead of the holiday, Fitch downgraded Spain’s credit causing stocks and oil to tumble. That was only temporary because at the end of the day we all know that Europe doesn’t matter, it is all about China and China has decoupled from the rest of the globe. Well, not so fast. Overnight the China Federation of Logistics and Purchasing reported that China's Purchasing Managers Index fell to 53.9 in May from 55.7 in April. That dip in Chinese manufacturing seems to suggest that perhaps China is getting impacted by the economic turmoil in Europe. China exporters count on Europe to buy their goods but it is possible that because of the turmoil it's happening at a slower pace.
Adding to the cracks in China’s unbreakable reputation is concerns rising surrounding their housing market. The Financial Times reports, “The problems in China's housing market are more severe that those in the US before the financial crisis because they combine a potential bubble with the risk of social discontent", according to Li Daokui, a professor and an adviser to the Chinese central bank. “The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis," said Li Daokui, a member of the bank's monetary policy committee. "It is more than (just) a bubble problem”.....
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