The rout started in Asia and quickly spread to Europe, battering major markets in Germany and France. “And this something has to translate into a weaker U.S. dollar“.
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THE QUOTE: “China has been on a mission to keep up the illusion of a gradual slowdown, but dealers aren’t buying it anymore”, said David Madden, market analyst at IG. “This is about growth“. Oil’s run of weekly losses is its worst since 1986, when the Organization of the Petroleum Exporting Countries ramped up production and sent it as low as $10 a barrel.
Markets began falling last week after China announced a surprise devaluation of its currency, the yuan. The Standard & Poor’s 500 index dropped 37 points, or 1.8 percent, to 2,000.
The blue-chip Dow Jones Industrial Average gave up 3.12 percent for the day and was down 5.82 percent for the week.
A dearth of new business caused factory output to shrink for the fourth consecutive month to hit a trough of 46.6, a level not seen since November 2011 and down from July’s 47.1. “But there doesn’t seem to be any signal that the weakness overseas is slipping into the U.S. economy”.
This time around, China, Vietnam and Kazakhstan have devalued their currencies, while Russian Federation has pegged the ruble to oil prices. Market turbulence had reduced the prospects for an interest-rate increase in September by the U.S. Federal Reserve, with the Fed-funds futures market now pricing in “a mere 32% chance” of such a move, Brooks added.
The Caixin flash PMI is the earliest economic measure of the Chinese economy to be released each month and is closely watched for clues on how growth is faring.
“They have the luxury of being able to wait and see what happens”, Perli said.
“In times of market stress, it is always hard to identify catalysts that will halt the turmoil”, Roberge said. For the rich world, the answer is no. The U.S.’s six-year-old bull market may be flagging, but its economic expansion isn’t.
That effectively ended the bitter feud dividing the Greece’s radical-left government and its European creditors that had threatened to force the country out of the euro and sow chaos in the global economy.
Markets will be watching out for the Markit composite PMIs for August, announced at 9am BST, Europe Friday.
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. In Britain, the FTSE 100 index dropped 2.8 percent. Yields on safe-haven US Treasuries slipped further, with the benchmark 10-year note falling to 2.0609 per cent. Lower Treasury yields and the stronger euro weighed on the dollar.
In the commodity markets, gold gained $6.40 to settle at $1,159.60 an ounce. Brent crude oil fell 0.7 per cent to $US46.31 a barrel, having touched its lowest level since January early Friday.
Martin Roberge, a portfolio strategist at Canaccord Genuity, noted that the U.S.-dollar bull market in the late ’90s eventually forced Thailand to unpeg its currency. Investors who once flocked to emerging-markets like Brazil and Russian Federation now shun them.
China’s dramatic final week spooked buyers and the newest spherical of knowledge has intensified fears that the world’s second-largest financial system could also be slowing sharply. Losses were particularly heavy in the emerging markets and the U.S.