Markets Lean Back

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What's going on?

Stocks globally pulled back on Tuesday as some news out of China suggested bad things for the global economy. It also didnt help that Goldman Sachs, the US investment bank, said the recent recovery in commodity prices is unsustainable.

What does this mean?

Firstly, there was data from China showing that its exports to the rest of the world fell 25% in February versus the same month in 2015 thats the largest drop since the financial crisis (2008). While the data might have been somewhat skewed by the Chinese Lunar New Year holiday (according to some), the magnitude of the decline is somewhat worrying.

Secondly, Goldman Sachs joined others in saying that Chinese demand wouldnt last and commodity prices (e.g. copper and iron ore) would fall again soon. Indeed, commodities and mining stocks fell quite a bit on Tuesday after strong gains on Monday.

Why should I care?

For you personally:Why should you care about Chinese export data? In theory, it suggests that other countries really dont have much demand for stuff right now and thats a sign of global economic weakness (which is typically bad for stocks). Of course, a bad economy also hurts most peoples pay, employment prospects and other such things.

For the markets: Stocks have had a huge rally lately is it over? Before Tuesday, US stocks were up for five straight days for the first time since October. Its not surprising that the rebound would eventually run out of steam and markets would pull back. The question now, of course, is whether it will kick up another gear or head further south. Investors are likely waiting on cues from the European Central Bank (which meets Thursday) and the US Federal Reserve (which meets next week). Stay tuned!

Originally posted as part of the Finimize daily email.

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