China’s ‘Black Monday’ Woes Sent The Global Market On A Nosedive
China's shares nosedived on what officials called a "Black Monday", causing a dramatic fall in the country's stock market while sending global markets into a sharp decline.
The FTSE 100 index of London closed down 4.6 percent at 5,898.87, while France and Germany's markets are down at 5.5 percent and 4.96 percent respectively. Overall, the loss of FTSE 100 was £73.75 billion.
Asian shares were affected in the one-day decline, as China's Shanghai Composite experienced its worst close since 2007 at 8.5 percent.
On the other hand, Wall Street's Dow Jones Industrial was down 6 percent, as the markets opened and almost recovered its loss before closing 1.2 percent at 12,257. Nasdaq and S&P 500 also rose to 0.55 percent and 1.1 percent after a drop of 8 percent and 5 percent on "Black Monday."
Deep Value's floor trader Stephen Guilfoyle stated he was "bordering on the edge of panic but not quite there yet."
As the US markets redeemed their shares, the rest of the global markets endured one of the biggest one-day declines in the stock market this year. This consequently lessened the chances of the US Federal Reserve from raising their interest rates in September.
"Given the uncertainty around the current global outlook, the timing of the rate hike seems more uncertain than usual," said Barclays economists on their note to clients.
"Should this episode of financial market volatility prove transitory, the FOMC [Federal Open Market Committee] could raise rates in December. On the other hand, if the volatility proves durable or reveals greater than expected weakness in global activity, the FOMC may push the first rate hike beyond March. We see a delay past mid-2016 as a relatively low probability at this point given our views on US labor markets."
J Streicher's Mark Otto figured that the market moves in the US on "Black Monday" were comparable to 2010's "flash crash" when the largest companies in the world lost billions of dollars, but were able to recover just as swiftly.
The biggest question now for investors and market watchers is how the government of China is planning to recover their shares and the confidence in their economy.
"Chinese regulators have enormous resources and tools to normalize the market [but] investors are very disappointed with the policy responses from China thus far," said CEO of Global X Funds Bruno Del Ama. "There is a sense that the government responses have been unorthodox, ineffective and unhealthy for the long term functioning of the Chinese capital markets."
