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From pensions to the cost of a US holiday - how the effects of Black Monday will be felt in your pocket


A risk manager studies the markets on the trading floor at the IG Index in London yesterday

A risk manager studies the markets on the trading floor at the IG Index in London yesterday

A risk manager studies the markets on the trading floor at the IG Index in London yesterday

After a dramatic start to the week on Monday, with stocks plunging from Beijing to London on the back of fears over the Chinese economy, markets in Europe and the US swung in the opposite direction yesterday, before the US lost ground again.

Stock markets pushed up on both sides of the Atlantic early in the day as investors sought out bargains and China decided to cut interest rates, which market watchers took as a sign that the Chinese government was prepared to shore up its economy.

Analysts were cautious, however, suggesting that more volatility may yet come as positive economic data was needed from China in order to truly calm fears. And they were right, as the rally fizzled out in the US before markets closed.

So how does the recent global market volatility affect you?

1. Company shares

If you've invested in company shares, it hasn't been a good start to the week for you.

Obviously, the performance depends on what stocks you have invested in.

But to give an example, the ISEQ on Monday, exacerbated by an unrelated poor performance by insurance group FBD, closed down 5.05pc. The London FTSE 100 dropped 4.7pc, with close to all stocks suffering falls.

However, some of those losses were recovered yesterday, as the ISEQ closed up 4pc - its biggest daily jump in more than five years - and the FTSE closed up 3pc.

So that should bring some relief.

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If you've invested in an Irish-listed share, it may not have been a bad year for you. So far this year, the Dublin index is up 16.7pc.

It's another story for the FTSE, though, which has fallen 7.9pc over that same period. And it's not good for US stocks either. All eyes will be on European shares again this morning.

2. Pensions

If you're working in the private sector, it is increasingly likely that your pension is a so-called defined contribution scheme, which means that you put a percentage of your salary into a private pension pot and this is then matched by your employer.

It is also likely that whoever is managing that pension pot will have invested a portion of it in shares, which means the value of your pension probably took a hit on Monday.

However, you can take some solace from the fact that, as explained above, European markets yesterday staged an impressive turnaround, which means that they have recovered some of their losses.

Also, if retirement is a while away yet for you, there's plenty of time for the market to recover more generally.

3. Holidays

That holiday to the United States got just a little bit cheaper this week.

The value of the euro rose against the dollar in the wake of the market jitters. As of yesterday afternoon, €1 was the equivalent of $1.14. Around a week ago, it was $1.10.

But generally speaking, it has been more expensive to holiday in the US this year than last year. In August of last year, €1 was the equivalent of around $1.34.

The reason is that the US Federal Reserve is expected to raise interest rates for the first time since the economic crisis, which is pushing the value of the dollar up because such a move would be seen as giving a boost of confidence in the recovering US economy.

Expectations of a rate hike as soon as next month, however, have diminished somewhat, in the wake of the global volatility.

But strong economic data out of the US yesterday hasn't entirely ruled that prospect out yet. If a rate hike does happen, expect the dollar to stregthen further.

4. Oil

Some good news at last. Oil prices remained around a six-year low yesterday, as a global oversupply and fears about the severity of the economic slowdown in China kept prices down. And lower oil prices are good for the consumer.

Indeed, oil prices have more than halved since this time last year.

A barrel of Brent Crude was trading yesterday at around $43 (€37.60), compared with $104 this time last year and $70 in May. Oil prices dropped to their lowest since early 2009 on Monday.

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