While you were sleeping: Panic seizes global markets

Tuesday 25th August 2015

Wall Street pared losses, after plunging in the first 10 minutes of trading after Chinese stocks plummeted as investors rushed to the sidelines.

"Anybody with a pulse was nervous when the market opened," Michael James, managing director of equity trading at Wedbush Securities in Los Angeles, told Reuters. "The only thing that's certain is the volatility is going to continue in the short term, given the magnitude of the moves that we've already had in the last four days."

The Dow Jones Industrial Average sank more than 1,000 points after trade opened on Monday but rebounded to trade 438.50 points lower, amid concern about China’s economic health and the impact on global growth. China’s benchmark Shanghai composite index tanked 8.5 percent.

Oil and other commodities slumped as well. US crude moved below US$38 a barrel for the first time in more than six and a half years. It last traded at US$38.64, down 4.5 percent.

“It’s a bloodbath,” Mark Hanson, an analyst who follows US crude explorers at Morningstar in Chicago, told Bloomberg. “We’re at an intersection of a lot of bad news.”

In late afternoon trading in New York, the Dow Jones Industrial Average dropped 2.7 percent, the Standard & Poor’s 500 Index slid 2.5 percent, while the Nasdaq Composite Index fell 2 percent.

A gauge of investors’ concerns, the CBOE Volatility Index or VIX, climbed 24.8 percent to 34.97 after rising as high as 53.29 earlier in the session.

"I think emotions got the best of investors," Philip Blancato chief executive at Ladenberg Thalmann Asset Management in New York, told Reuters. "The conjecture that the Chinese economy can propel the US economy into recession is ridiculous when it's twice the size of the Chinese economy and is consumer based."

Slides in shares of DuPont and those of Cisco, down 3.7 percent and 3.6 percent respectively, led the Dow lower. Bucking the trend was Intel; its shares last traded 1.9 percent higher.

Shares of Apple last traded 0.8 percent lower at US$104.96, after the stock had sunk as low as US$92.00 earlier in the session.

Apple’s chief executive, Timothy Cook, opted to email Jim Cramer, the television host of CNBC’s “Mad Money,” with an update on the company’s performance in China.

“I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August,” Cook said in the email to Cramer. “Obviously I can’t predict the future, but our performance so far this quarter is reassuring.”

In Europe, the Stoxx 600 Index ended the day with a 5.3 percent drop from the previous close. The UK’s FTSE 100 Index sank 4.7 percent, as did Germany’s DAX Index, while France’s CAC 40 Index plunged 5.4 percent.

The DAX “will certainly be at the forefront of declines in Europe,” Stewart Richardson, chief investment officer at RMG Wealth Management in London, told Bloomberg. “This could go down quite a bit. Traders are looking for the positions which are easier to get out of, more liquid, and where they have the biggest exposure -- and Germany fits those counts.”

BusinessDesk.co.nz

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