Deflation threat returns to Asia
The deflation scare of the past year has resumed with a vengeance since the oil and commodity markets remain on a sliding slope.
Shanghai’s stock market is in shock, since the Chinese economy is cooling down and will probably lead to a lower global growth, while waiting the US interest rates to rise. Up until spring, the deflation scare was minimising, with investors strongly believe that the fall of the oil prices was over. As a consequence of their actions followed, victory could have been declared.
Nevertheless, a major index fell to its lowest since the global recession in early 2009. However it breached its lowest, a doubt was created on the expectations that raw materials costs would soon stop bringing the annual consumer inflation rates down.
Bruce Kasman, global chief economist at JP Morgan, stated:
“The worries on the weakness in commodity prices and the expected results, the main reason being for fear that if consumer prices falls, the real value of the corporate and government debts will then rise, making it increasingly hard to repay.”
The US Dollar and Sterling are rising in anticipation of higher rates which are deflationary as they lower the price of imports. While inflation’s percentage has dropped since the end of last year, investors are left wondering where the best option to invest their money is.
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