What Caused U.S.-China Market Turmoil?

What Caused U.S.-China Market Turmoil? by Dan Steinbock, Difference Group

As the Fed is paving way for the first rate hike in a decade, the world economy prepares for the greatest shift of capital flows in half a decade. Recent market turmoil in the U.S. and China heralds the transition.

According to the conventional wisdom, the U.S. economy is recovering significantly faster than other advanced economies and the dollar is strengthening. In contrast, China’s economy is facing a slowdown with growth decelerating and the yuan depreciating.

The realities are more complicated. In early June, Dow Jones (DJIA) still exceeded 18,200 and the Shanghai Index was close to 5,200. But last week was the worst in Wall Street in four years as...