Business World

Tuesday 20 March 2018

Shares, pensions and oil prices battered on 'Black Monday'

A broker sits in front of screens showing share prices at a securities brokerage in Hong Kong
A broker sits in front of screens showing share prices at a securities brokerage in Hong Kong
Colm Kelpie

Colm Kelpie

Shares, private pension funds and oil prices took a battering amid concerns over the slowing Chinese economy, on what became known as 'Black Monday' on the stock markets.

Markets from Shanghai to Paris and New York all slumped in what commentators quickly dubbed 'The Great Fall of China'.

The volatility centres on fears that the world's second biggest economy is slowing.

Investors are concerned that the Chinese slowdown, which has been known for some time, may be worse than thought.

Beijing unexpectedly devalued its currency earlier this month, sending shockwaves across markets.

Billions have been wiped from indices across the world and Japanese stocks posted their worst day in two years. Chinese stocks sunk the most in eight years, and European shares tumbled across the board.

Everything from shares, to currencies and the price of oil has been affected.

Exacerbated by a sharp fall in FBD shares, the Irish Stock Exchange, the ISEQ, closed down 5.05pc - it's worst performance in five years, when the index dropped 5.78pc on August 24, 2010.

When US markets opened yesterday afternoon Irish time, the Dow Jones briefly plummeted around a 1,000 points on opening before clawing back the losses.

But by 8pm last night Irish time, it was down 3.5pc.

"Stock markets were falling apart at the seams," said Jasper Lawler at CMC Markets.

"There was one point today when there just seemed to be no buyers and markets just went into freefall."

The dollar also fell against the euro, pushing the single currency to a seven-month high.

The value of the dollar fell yesterday because experts are increasingly doubtful that the US Federal Reserve will increase interest rates next month, as had been expected in some quarters.

And oil prices, already suffering from over-supply, fell because a slowing Chinese economy means less demand.

It has been estimated that more than $5 trillion has been wiped from the value of global equities since China initially devalued its currency, the yuan, on August 11.

The scale of the losses yesterday prompted global leaders to intervene in a bid to soothe investor concerns.

German Chancellor Angela Merkel, at a press conference along with French President Francois Hollande, said China would do everything to stabilise the economic situation.

Mr Hollande made similar remarks but also stressed that the world economy was strong enough to weather the rout.

The Chinese economy has faced difficulties this year as slowing growth in manufacturing, retail sales and domestic investment has been compounded by a slowing property market.

Growth in the sprawling Asian giant is expected to be 7pc this year - healthy by European standards - dropping to 6.7pc next year.

But while China's economy grew by 7.4pc last year, that was the slowest growth since 1990.

China's stocks plunged the most since 2007 as government support measures failed to allay investor concern that the slowdown is deepening.


Market jitters swept across the globe, with the sell-off in Asian markets moving to Europe, pushing major markets such as Paris and Berlin 5.5pc and 4.7pc lower respectively.

A senior official with the International Monetary Fund sought to assuage fears by saying a Chinese slowdown and the sharp stock market fall does not herald a crisis, but a necessary adjustment for the country.

Carlo Cottarelli, an IMF executive director representing countries such as Italy and Greece, said it was premature to dub the situation a crisis.

Irish Independent

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