Global Stock Market Headed For Historic Declines
After remaining in a narrow range for most of 2015, the Dow Jones fell more than 1,000 points on Monday.
“If things don’t settle down in China, we could have another ugly open tomorrow and you wouldn’t want to be caught holding positions you bought this morning,” said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin. The Dow Jones closed at 15,871, down nearly 4%.
“Emotions got the best of investors,” Philip Blancato, chief executive at Ladenberg Thalmann Asset Management in New York, told Reuters.
“The conjecture that the Chinese economy can propel the U.S. economy into recession is ridiculous, when it’s twice the size of the Chinese economy and is consumer-based.
China’s economy is declining as has been suspected by many for some time to come. The state media called today black Monday as the Shanghai Composite closed 8.5% in the red, experiencing its worst day since 2007.
The Dow Jones Index in the US fell 1,000 points. This is the largest drop ever on the Dow, which had never lost more than 800 points in a single day.
London’s FTSE 100 declined for the 10th day in a row and is now at its lowest levels since the beginning of 2013. More than 40 billion pounds has been wiped from its books.
“Markets are panicking. Things are starting look like the Asian financial crisis in the late 1990s. Speculators are selling assets that seem the most vulnerable,” Takako Masai, head of research at Shinsei Bank in Tokyo, told Reuters.
“The equity markets are dealing with the prospect of a weaker yuan amplifying the negative impact from a sluggish Chinese economy,” Eiji Kinouchi, chief technical analyst at Japanese investment bank Daiwa Securities, told reporters.
The People’s Bank of China devalued the yuan on August 11 in order to promote “market liberalization” according to Beijing. China devalued its currency the next two days as well. This did not stem volatility, as many believe it was meant to.
The movements we’ve seen have been so fast and so large,” Peter Costa, the president of the trading firm Empire Executions, said on CNBC. “You’re talking about 75, 100-point moves in two minutes. It’s been extremely fast, and it’s happened very, very quickly.”
“Fear has taken over,” Adam Sarhan, CEO of the investment company Sarhan Capital, told CNBC. “The market topped out last week.”
People are moving to get out of the stock market. “What’s a company that’s doing business with China actually worth right now?” JJ Kinahan, TD Ameritrade’s chief strategist, informed The Associated Press. “When you’re not sure, you tend to sell.”
Donald Trump has taken the opportunity to promote his republican presidential campaign, blaming the US’s close ties to China for the decline in the stock market today.
Gold is down approximately 0.6% on the day, with silver down 50 cents to $14.75. That gold is down is counter-intuitive considering its appeal as a safehaven, while silver generally takes a major dump amid such tall economic volatility.