FT story rattles China, Eurozone, world markets

There’s influence and influence and the Financial Times seems to have it in spades if the reaction to a story in last Wednesday’s pink ‘un is any guide.

The FT wrote that China, the world’s biggest buyer of government bonds (it has buckets of surplus cash from its cheaply-priced exports) had decided to stop buying European government bonds.

Stocks around the world plummeted, with the New York Dow Jones forced below 10000 for the first time in nearly a year and the London FTSE lost about three per cent.

Yesterday (Thursday) the Chinese denied the report, saying the story “had no basis.” Stock markets promptly rallied and were still still going up, rather more slowly, on Friday morning.

What’s the truth of it?

Well the Chinese, like every other investor, must have the odd worry about the Eurozone in particular, where the so-called Club Med countries, Greece, Italy, Portugal and Spain are all labouring under heavy debts with consequent fears about the health of all the banks that have lent money to them.

The FT remains unrepentant, claiming today that China would like to reduce its European holdings but is concerned about inflicting damage on European economies which represent a huge market for its exports. And it’s probably right.

But it still says something about the febrile state of world markets when one story can wreak so much havoc.

There’ll be more to come, not least the FT is up against a revivified Wall Street Journal under Rupert Murdoch’s ownership that is pursuing news exclusives much more aggressively.

The FT feels obliged to respond and the formerly quite gentlemanly activity of global financial journalism now has a tabloid aspect. Which is another worry for nervous investors.

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.