Global markets enter correction on China fears

Oil has dropped below $40 a barrel for the first time since the end of the global economic crisis.

He said he was confident that the Chinese economy would grow and said that the American housing market “has been going up at a good clip”. “This is about growth“.

The Dow’s 1000-point drop this week was the largest weekly drop since the week ended October 10, 2008.

The Dow industrials, Nasdaq 100.NDA and major European stock indices have now fallen more than 10 percent from their peak earlier this year.

Markets have grown volatile since China made a surprise move last week to devalue its currency by the biggest amount since 1994. At Friday’s close, the Dow stood at 16,459.75, down 10 percent from the record high of 18,312.39 it reached in May. The Nasdaq is precariously close to being in a correction, down 9.8 percent from its most-recent high, but that is not by definition a correction.

Analysts believe that the past week’s precipitous stock market drop was due to investors interpreting all news as bad news. For years, investors have been fretting that the market could drop sharply when the central bank starts raising rates.

Those worries are valid, said Jeremy Zirin, head of investment strategy at UBS Wealth Management. “But there doesn’t seem to be any signal that the weakness overseas is slipping into the U.S. economy”.

The upside to falling oil is that all the money that drivers are saving at the gas pump should mean more spending by them at stores – and a faster-growing U.S. economy. The dollar fell because the weak global economic news makes it look doubtful that the Federal Reserve will raise U.S. interest rates next month.

The main indexes posted massive one-day selloffs and their biggest weekly declines in almost four years.

Market analysts widely see September or even later as the most likely time for a Fed rate increase, which also dampened investor enthusiasm.

“They have the luxury of being able to wait and see what happens”, Perli said. That, coming on the heels of weaker-than-expected data in July, stoked fears of a slowdown in the world’s second-biggest economy. “As long as the whole global economy doesn’t shut down, you will survive”.

Widely held stocks such as Wells Fargo, Google and Facebook have lost tens of billions of dollars in market value in two days.

An early gauge of China’s factory activity fell to a 6 1/2 -year low in August (http://www.marketwatch.com/story/china-caixin-manufacturing-pmi-hits-6-12-year-low-2015-08-21).

Among leading indices, Tokyo shares lost 2.98 per cent, Hong Kong 1.53 per cent and London’s benchmark FTSE 100 lost 2.83 per cent.

Dow component Apple’s (AAPL.O) shares resumed their fall and decreased 1.2 percent to $111.31 in premarket trading, a day after a Gartner report on China’s slowing smartphone sales.

US government bond prices rose, pushing the yield on the 10-year Treasury note down to 2.04 percent. Brent fell $1.16 to settle at $45.46. Crude oil prices fell below the key $40 a barrel level. Friday’s fall, to $39.86, was just the latest indicator of a vast shift in the energy landscape over the past year. “You have across-the-board competitive currency devaluations that will invoke the deflationary monster here in the US”.