On 24 August, 2015 – Sharp sell-off in global markets as China worries continue

Stocks plunged globally as the sell-off intensified on continued worries about Chinese growth. Investors wondered how the financial market turmoil would impact the Federal Reserve’s policy decision in mid-September.
United States
US stocks tumbled Monday, their fifth straight drop, in an unusually volatile session that confirmed the S&P was formally in a correction. The Dow Jones industrials dropped 3.6%, the S&P 500 lost 3.9% and the Nasdaq Composite retreated 3.8%.
As the Dow tumbled more than 1,000 points six minutes after the market open, traders said some of the initial sell orders were from big investors scrambling for ways to protect themselves against losses outside the United States. Investors bracing for continued financial market turmoil took out bearish bets on US stocks to protect against falling markets in other countries.
Trading is often more challenging in emerging markets due to a fewer numbers of buyers and sellers so investors turned to the US, home to the deepest stock markets in the world. Some analysts noted that although stocks have dropped sharply, the fundamentals for the US have not changed. Fresh signs of a slowdown in China have jolted stocks, bonds, currencies and commodities in recent days. Investors were further rattled Monday by the lack of fresh steps to stem the selloff over the weekend from Chinese authorities.
The New York Stock Exchange operator NYSE Group invoked the rarely used “Rule 48,” which relaxes some trading rules in a bid to ensure a smooth opening to trading. The rule is instituted when trading before the start of the regular session is especially volatile.
Gold at the afternoon London fixing was up US$10.00 to US$1,166.50. Copper futures were down 2.6% to US$2.24. WTI spot crude was down US$2.28 to US$38.17. Dated Brent spot crude was up US$1.92 to US$42.54. The US dollar was up against the Canadian and Australian dollars. However, it declined against the euro, yen, pound and the Swiss franc. The Dollar Index dropped 1.3%. The yield on US Treasury 30 year bond was up 3 basis points to 2.75% while the yield on the 10 year note slipped 2 basis points to 2.02%.
Europe
Stocks indices here followed Asian markets lower, plunging as much as 6.0% (MIB) on the day. The FTSE and DAX both lost 4.7%, the CAC dropped 5.3% and the SMI was 3.7% lower. The DAX index is now down more than 20% from its all-time high in April, meaning it has entered what is widely called a bear market. The index has been having a tougher time than most during the China-inspired market rout, a far cry from its storming start to 2015. It contains many exporters — particularly auto firms like Daimler and BMW — that make a big chunk of their revenue in China. And more broadly, the index is tilted toward cyclical stocks that tend to suffer on fears about a global economic slowdown.
The losses occurred as investors worried about China and sparked the largest one day decline in the Eurozone in several years. Mining and resource stocks were under pressure on concerns over the slowdown in China. Energy stocks were also hit by the continued drop in crude oil prices. Financial and insurance stocks also turned in a weak performance Monday.
RWE and E.ON tumbled. Banks Deutsche Bank and Commerzbank retreated as did Société Générale, BNP Paribas and Crédit Agricole. ThyssenKrupp declined as did Salzgitter. Total surrendered and Technip slid. Renault and Peugeot were down. In London, mining stocks were under pressure due to Chinese concerns. Glencore, Anglo American, BHP Billiton and Rio Tinto were lower. Oil companies BP, Royal Dutch Shell and Tullow Oil sank.
Asia Pacific
Concerns over slowing growth in China spurred panic selling across the region, prompting many to term it “Black Monday.” The Australian market suffered its biggest one-day drop since September 2011, Japanese shares slid to a five-month low and Seoul shares dropped to a two-year low, as stock prices in mainland China fell sharply once again on growing concerns that the Chinese economy is much weaker than suspected and that the country’s People’s Bank of China will move to weaken its currency over time to boost sagging exports.
The Shanghai Composite index plunged almost 9% in early trading before recouping some of its loss to end the session down 8.5%, a five month low. The hefty plunge came even as Beijing allowed its main state pension fund to invest up to 30% of its net assets in domestically listed shares. The Hang Seng slid 5.2%, extending declines for the seventh straight day as fears surrounding the health of China’s economy intensified.
The Nikkei plunged 4.6%, its lowest level since February 23. Economy Minister Akira Amari reportedly said that he expects China’s economy to settle down as policymakers take steps to bolster growth. Export oriented shares bore the brunt of the selling as the safe haven yen rallied against its rival currencies on growing expectations that the Federal Reserve could delay raising interest rates till the very end of 2015. Canon, Nissan Motor, Panasonic, Honda Motor, Hitachi, Toyota Motor and Sony retreated.
The S&P/ASX tumbled 4.1% and the All Ordinaries lost 4.0% as investors dumped shares across the board on growing fears of a China-led global economic slowdown. Fortescue Metals Group plummeted after its full-year profit slumped 88% amid tumbling iron ore prices. BHP Billiton and Rio Tinto retreated as well.
The Kospi was down 2.5% as heightened tensions along the Korean Peninsula and fears that China’s oil and commodity imports could fall further prompted foreign investors to offload stocks for the 14th straight session. The Sensex joined the global sell-off and plunged 5.9%.
Global Stock Market Recap

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
Germany posts second estimate of second quarter GDP and August Ifo survey. In the US, June house prices will be reported by FHFA and S&P/Case Shiller. July new home sales are on tap along with August consumer confidence.
*Note — all releases are listed in local time.