World stock markets tumbled towards their worst week of the year and commodities got another kicking, as the data sent investors scurrying to the safety of bonds and gold.
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The rout started in Asia and quickly spread to Europe, battering major markets in Germany and France. Strong employment numbers and other economic indicators suggest that the U.S. economy remains resilient. A year ago a barrel of oil was about $100.
A searing six-year rally in U.S. stocks had advanced into the summer months, shrugging off challenges such as the dispute over Greece’s debt. “This is about growth“. The Dow Jones industrial average is more than 10 percent below the high it reached in May.
Global financial markets were battered again yesterday, ending a bruising week as investor concern over a slowdown in China showed little sign of abating. The new bout of global selling followed news of a survey showing manufacturers on the mainland continue to contract.
The Dow closed at 16,459.75, down 531 points, or 3.12 percent daily decline; the S&P 500 closed at 1970.89, off 65 points, or 3.19 percent. The blue-chip index is now down 8.4% from its all-time closing high set in May. “We still think there is potential for more downside, but view this as a buying opportunity”.
“There’s a lack of positive economic news to motivate buyers”, David Kelly, chief global strategist at JPMorgan Funds said, according to CNBC.
The headline seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index dipped from 53.8 in July to 52.9 in August, missing market estimates of 54.2.
The Federal Reserve also just stated that the time for a rate hike is ‘approaching’. The sell-off that erased US stock gains for the year and pulled Chinese shares down dragged the Stoxx Europe 600 Index 6.7 per cent lower in three days, the worst plunge since September 2011. The S&P 500 has more than tripled in value since the financial crisis. “But at the end of the day if people are trying to take down risk, then it’s going to make sense for them to sell their exposure in equities as well”.
The market turmoil has some traders exercising caution.
In New York, some analysts called the fall a long-needed correction in shares whose valuations – especially for tech companies – were pushed too far helped by the continued supply of cheap money from the leading central banks in Tokyo, Beijing, Frankfurt and Washington.
Fears about China’s economy have been heightened by the heavy losses suffered by its benchmark index this week.
Apple (NASDAQ: AAPL) led the Dow decline, dropping almost 6 percent and entering bear market territory.
Considerable weakness was also visible among airline stocks, as reflected by the 3.5 percent loss posted by the NYSE Arca Airline Index. Japan’s Nikkei 225 Index dove by 3 percent, while Hong Kong’s Hang Seng Index slumped by 1.5 percent.
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Deere fell 8 percent to $83.34 after the tractor maker’s quarterly profit declined 40 percent. Earlier this month, its yuan currency weakened against the US dollar. Investors who once flocked to emerging-markets like Brazil and Russian Federation now shun them.
