Tuesday 20 March 2018

Global financial markets battered again after $2.2 trillion wipeout

Markets from Tokyo to Europe have been hammered amid global concerns over the state of the Chinese economy
Markets from Tokyo to Europe have been hammered amid global concerns over the state of the Chinese economy
Colm Kelpie

Colm Kelpie

Global financial markets were battered again yesterday, ending a bruising week as investor concern over a slowdown in China showed little sign of abating.

US stocks were heading for their worst week since 2012, thanks to a sell-off sparked by global growth worries, while US oil prices headed for their eighth consecutive week of falls, marking the longest losing streak in 30 years.

The sell-off has dragged the Stoxx Europe 600 Index 6.7pc lower in three days, the worst plunge since September 2011.

Bloomberg estimated that about $2.2 trillion (€1.93 trillion) was wiped from the value of global stocks in the first four days of the week.

While investors were already jittery, worries about a slowdown in the world's second largest economy intensified yesterday as manufacturing in the sprawling country fell in August at the fastest pace since the height of the financial crisis.

Asian stocks also followed Wall Street lower, with commodities and emerging stocks taking a battering too.

"It will be all eyes on the Chinese authorities for any further policy support steps, alongside the People's Bank of China yuan fixings and trading swings," analysts at Investec Economics said in a note to clients.

But the uncertainty sparked by another Greek election, and a hotly anticipated meeting of the Federal Reserve next month amid expectations of the first US interest rate hike in almost a decade, are also likely to keep markets on tenterhooks for the coming weeks.

China has taken centre stage over recent weeks after repeated devaluations of the yuan and weaker than expected export data.

The central bank has said there was no reason for the currency to fall further, but investors are also bracing for further interest rate cuts.

Yesterday's market woes were triggered by a survey showing manufacturing in China fell at its sharpest pace in more than six years.

It was the worst reading since March 2009, in the depths of the global financial crisis, and the sixth straight one below the 50-point level. Anything below 50 signals contraction, while above it means expansion.

The global concerns are likely to be the focus of discussions when economists and central bankers meet in the picturesque, mountainous surroundings of Jackson Hole, Wyoming, next week for the annual Federal Reserve Bank of Kansas symposium.

The theme of this year's gathering is inflation and monetary policy, and will serve as the precursor to the US Fed's September policy meeting which is being keenly anticipated by analysts amid expectations that it could spark the beginning of an interest rate-hike cycle by the US central bank.

But the Fed appeared to pour cold water on those expectations earlier this week, after minutes released from July's meeting suggested members of the policy committee weren't convinced that the global economy could weather a hike at this point.

Some Federal Reserve officials agreed the US economy was nearing a point where rates should move higher, but others were worried that lagging inflation and a weak global economy posed risks. (Additional reporting agencies)

Irish Independent

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