The European markets, however, seemed to shrug off the Chinese rout.
Advertisement
It was another triple-digit decline for the Dow Jones Industrial Average which dropped 204.91 points to 15,666.44, while the broad-based SP 500 was down 1.35 per cent, closing at 1867.62.
Many commodity-related stocks recovered from early weakness to trade higher, as oil and metals prices bounced off their lows.
The Shanghai Index closed down 7.6% and Japan’s Nikkei dropped 4%, but a host of other markets (the Stoxx Europe 600, Germany’s DAX, and France’s CAC) were up more than 2% this morning. While China’s stocks continued to slide, it appeared on that investors were dipping a toe back into the investment pool on Tuesday in hopes of finding bargains. After being down by 4% earlier in the day it then went 3% up before dropping back. Look, what’s going on is, essentially it’s all about China at this stage. The benchmark gauge of European equities plunged as much as 8.1 per cent before paring losses to 5.3 per cent.??It finished the day 17 per cent below its April record, erasing gains for the year.
Monday’s selloff was triggered by worries about China after last week’s devaluation of the yuan and bleak manufacturing figures cast doubt on the authorities’ ability to manage the economy.
Chinese authorities tried to reassure investors over the weekend as Beijing said it was putting together a proposal to allow the main state pension fund to invest in the stock market.
“Monetary policies have been very expansive in recent years and an adjustment is necessary”, said Carlo Cottarelli, an IMF executive director – he added that it is “totally premature” to say that China is facing an economic crisis. Brent crude fell below $45 a barrel for the first time in more than six years amid signs a global glut will persist as Iran pledged to boost production and U.S. drilling activity sustained an increase.
Oxford Economics Andrew Goodwin underlined the implications of the slump. Russia’s rouble also hit a new 2015 low and stocks sank, battered by falling oil prices and the impact of sanctions over Ukraine.
Advertisement
Investors in the U.S. are watching China but closer to home, they’re watching what the Federal Reserve and whether it decides to raise its benchmark interest rate. A weaker reading would likely fuel mounting expectations that the Fed will delay a rate rise beyond the September start data previously seen as likely because of global economic uncertainties.
