US stocks continue to slump; Chinese shares plunge

Stocks fell across the board on Monday, with 2,247 companies falling, leaving only 77 gainers.

The campaign even acquired nationalistic tones at times, with local governments calling on retail investors to “defend the stock market”, and domestic media and popular commentators expressing suspicions that the crash was engineered by a foreign cabal. Emerging markets across the world are not immune, and the MSCI Emerging Markets Index lost another 1.9 percent on July 27, and absent a dramatic rebound, July will mark the worst monthly performance for the index in three years.

“We’re pricing in no growth, or 2 percent”, when in reality China is going from 8 or 9 percent to 6 or 7 percent GDP growth, Hogan said.

The Chinese stock market has fallen 8.5 per cent, marking the second worst day for the market in 18 years. The local market, with its high proportion of dividend-yield stocks, typically reacted less violently to big swings on world markets.

Last night, Reuters reported that the China Securities Financial Corporation, the state margin lender that used loans to buy shares in embattled Chinese stocks, had returned some of the funds it borrowed from commercial banks ahead of schedule.

The large chasm between the rich and the poor, and the short time frame in which certain Chinese investors have acquired vast fortunes has spawned a “get rich quick” ethos which further perpetuates the problem. That led investors to believe the government would ensure that stock prices would rise. Many small retail investors were hurt by the rout.

Faced with global declines in stock prices, investors moved into traditional safe havens.

Hong Kong’s Hang Seng shed 3.1 percent and Japan’s Nikkei 225 dropped 1 percent. While stocks in Southeast Asia were lower, as well, Australia’s S&P/ASX 200 gained 23.8, or 0.4 percent to 5,589.90.

The Natixis team doesn’t expect the value of the Chinese renminbi to decline significantly because Chinese officials have been striving to keep it stable as they attempt to internationalize it. They’re targeting about 6.35 renminbi per one U.S. dollar, compared to about 6.11.

The Euro STOXX 50 index, the European equivalent of the Dow 30, fell 2.4 percent. Germany’s DAX dropped 1.1 percent, France’s CAC 40 lost 1.2 percent and the U.K.‘s FTSE 100 declined 0.2 percent. “Once those disappear, the market cannot support itself”. GBP is a bit soft as reports the Brexit referendum on EU membership could be scheduled by June 2016 raise questions about what impact that could have on the Bank of England’s interest rate liftoff schedule.

“The extent of the sharp drop would appear to suggest that the Chinese economy is struggling to respond to the measures already implemented, raising wider concerns of a much sharper and deeper slowdown”, said CMC markets analyst Michael Hewson.

Brent crude fell 84 cents to $53.78 a barrel, touching its lowest in nearly four months, adding to falls which are expected to put more downward pressure on global inflation.

The common currency gave back some of its early gains from a bullish Ifo survey of German business sentiment to stand up 0.8 per cent on the day at $1.1076. Copper futures were down another 0.5 percent on Monday.