Global financial markets plummeting as China halts stock trading after 7% collapse
The Dow Jones is down nearly 400 points. The German DAX has tumbled close to 500 points. The Toronto Stock Exchange has fallen just under 300 points. London’s FTSE has crumbled 400 points. All of this has been created due to China’s stock markets crashing seven percent, which caused a suspension in trading, and very weak economic data. Both are ingredients for a recipe of financial disaster.
What a great start to 2016!
The Shanghai Composite dropped 6.85 percent to 3296.66, the Shenzhen Composite plunged 8.1 percent and the CSI 300 briefly plummeted 7.02 percent. When the latter’s index crashes at least seven percent then the Chinese markets halt trading.
All over the world, stocks are crumbling as Emerging Markets are leading the losses. What’s happening exactly? Well, a slowdown in manufacturing trigged the selloff, while Asian currencies have weakened substantially. Precious metals and credit markets have stumbled. But bonds experienced a boost, the Japanese yen rallied due to the demand for safe haven assets and oil jumped by about three percent.
Increase tensions in the Middle East also fueled the collapse in stock markets everywhere.
Manufacturing indexes in several leading countries have become tepid, and some of the indexes indicate a contraction to under the 50 threshold. Moreover, China’s factory activity fell for the 10th consecutive month in December as economic data across Asia highlight the fact that the manufacturing industry is feeling the effects of slow demand, even with the rollout of fresh stimulus.
“This is a pretty dramatic start of trading for the year,” said Khiem Do, the Hong Kong-based head of multi-asset strategy at Baring Asset Management, in an interview with Bloomberg News. “Some investors may have been unwinding their positions when trading volumes were light. That could have exaggerated the moves. The market has been very difficult to predict.”
Speaking of Bloomberg, here is what the business news outlet writes:
“Trading was halted at about 1:34 p.m. local time on Monday after the CSI 300 Index dropped 7 percent. An earlier 15-minute suspension at the 5 percent level failed to stop the retreat, with shares extending losses as soon as the market re-opened. Traders said the halts took effect as anticipated without any major technical problems.”
Here is also the chart from the business network:
This just shows that no matter how much money central banks print, how much stimulus governments hand out or how low interest rates are kept, the global economy isn’t experiencing any of the positive effects of the stimulus measures suggested by statists and Keynesians worldwide.
Debt is a real problem. Just take a look at this headline from Bloomberg: “Biggest Economies Face $7 Trillion Debt Refinancing Tab in 2016.”
Indeed, 2016 will be an interesting year.
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