Tag Archives: Economic Decline

Historic Drop on Wall Street at Opening Bell

Investors are bracing for an incredibly ugly and volatile day on Wall Street today as China closed to their own version of a “Black Monday” and the Dow dived over 900 points at the opening bell.    Oil Prices plunged below $40 a barrel. At this moment we are down 6% and have lost 1000 points on the DOW.  

Experts agree that the market in China, the uncertainty on the interest rate and the effect of cheap oil are causing this slide.  Many are stating that there must be something more happening to cause this type of market descent.  

China’s market last dropped this low in 2007.  And is down more than 40% in the last two weeks.  This is being called a Market Crash by most of the financial community.  

Dow Hits Market Correction Status

The U.S. stock market took another tumble on Friday, down more than 2 percent thanks in part to a scare in the oil market that saw price hit milestones. The dip of over 450 points sent the Dow Jones Industrial Average (DJIA) into the area called a “market correction.”

The oil market fell below $40 a barrel in trading for the first time since 2009 before rallying to finish at $40.45, down 87 cents on the day. The dip is partially attributed to the problems in China as that nation is the world’s largest energy consumer.

The Dow Jones Industrial Average (DJIA) was down over 470 points in afternoon trading a day after the index finished 358 points lower. The slide on Friday has taken the DJIA more than 10 percent lower than the record high close of 18,312.19 reached on May 19th. This means the Dow is in what is considered a “market correction.”

These are rare happenings with the last one happening in August 2011 when the S&P suffered a 10% correction. In that correction, the S&P hit 19.4% before rebounding to current levels which are still 6.3% off its high.

“Right now there is a feeling of fear in the marketplace and all news is interpreted negatively and it’s interpreted indiscriminately,” said Tom Digenan, head of U.S. equities as UBS Global Asset Management, told CNBC.

The Standard and Poor’s index, already in the red for the year, fell another 1.8%. The NASDAQ fell 1.9%.

Tokyo’s Nikkei 225 index plunged nearly 3% and Hong Kong’s Hang Seng index fell 1.9%.
The Shanghai composite index on mainland China dropped over 4%. MarketWatch noted China’s benchmark index is down 32% since June 12.

Stocks Fall on Concerns over Oil Prices, Fed Minutes

The stock markets fell more than one percent under pressures from low oil prices and the uncertainly from the Federal Reserve over the raising of interest rates.

The Dow Jones Industrial Average (DJIA) was over 300 points lower Thursday after a 163 point drop on Wednesday.  The pace means the DJIA will have its worst day since losing 350 points on June 29th.

Markets around the world were impacted as well.

Japan’s Nikkei 225 falling 0.9%, the Hang Seng index in Hong Hong off 1.8%, the Shanghai composite in mainland China down 3.4%, Germany’s DAX off 2.3% and the CAC 40 in Paris off 2.1%.

“I think the oil and the geopolitical problems are the real problems for the market because we’re looking at lower global economic growth, and lower global growth is going to weigh on the U.S. as well,” Peter Cardillo, chief market economist at Rockwell Global Capital, told CNBC.

Some analysts, however, say that the movement by China last week to devalue the Yuan over two consecutive days is also impacting the market.

“There is heightened uncertainty that began with yuan devaluation last week, while overall China’s growth is slowing faster than thought. This is weighing on confidence,” Randy Frederick, managing director of trading & derivatives at Schwab Center for Financial Research, told CNBC.

(Update 8/20/1015 at 4:48PM CT: Since this story was originally reported the dow has dropped 2% and is currently at 358.04.)

China’s Currency Impacts World Markets for Second Day

China’s Central Bank cut the guiding rate for their national currency for the second day in a row, impacting world markets as the Chinese government attempts to boost exports.

Officials with the Central Bank tried to dampen the shockwaves being sent through world markets by saying the day’s move was not part of a sustained devaluation of the Chinese currency.

“Looking at the international and domestic economic situation, currently there is no basis for a sustained depreciation trend for the yuan,” it said in a statement.

The Yuan was down 1% Wednesday after a 1.9% devaluation Tuesday.  The total overall decline is the largest in two decades and comes after Chinese government reports showed exports from the nation fell 8% during July.

The currency is now going to be set based on market forces where it previously had been set solely by the People’s Bank of China alone.

“Greater exchange rate flexibility is important for China as it strives to give market-forces a decisive role in the economy and is rapidly integrating into global financial markets,” the International Monetary Fund said in a statement regarding the Chinese action.

Some U.S. officials were harsh in their comments toward China’s action.

“For years, China has rigged the rules and played games with its currency. Rather than changing their ways, the Chinese government seems to be doubling down,” New York Senator Chuck Schumer told the BBC.

The U.S. Treasury’s response was more neutral.

“We will continue to monitor how these changes are implemented and continue to press China on the pace of its reforms, including additional measures to transition to a market-oriented exchange rate and its stated desire to move towards an economy that is more dependent on domestic demand, which is in China and America’s best interests. Any reversal in reforms would be a troubling development.”

As of noon EST, the Dow Jones Industrial Average was down 160 points and all major markets around the world were lower.

China Jolts World Markets with Yuan Devaluation

China’s central bank announced they devalued the country’s currency by 2%, causing the biggest one day loss in the currency trade for the Yuan in decades and showing the second-largest economy in the world continues to struggle.

The move is causing major concern among traders around the world that other nations will begin to devalue their currencies in an attempt to gain advantage in a slower trade market.

“In terms of competitive forces, this raises the stakes. This isn’t a war per se but about maintaining competitiveness. A lot of significant emerging markets have been using this valve,” said Andre da Silva, global head of interest rate strategy at HSBC Holdings, referring to currency devaluations.

“The yuan exchange rate will be more market-oriented going forward,” Zhou Hao, an economist at Commerzbank in Singapore, wrote in a report. “Volatility of both the onshore and offshore rates will pick up significantly.”

The move by China caused the Dow Jones Industrial Average to fall over 200 points.  Apple fell more than 4 percent and Caterpillar fell more than 3.5 percent because of the Yuan’s impact on the profits of those multinational corporations.

Analysts say that Apple was a target of the move because the decline helps Apple’s Chinese rivals.

“Chinese tech companies across sectors are all pushing out into the world,” said Xiang Ligang, chief executive of Chinese telecommunications industry website cctime.com. “The yuan devaluation will make these products that much more competitive overseas.”

Chinese Stock Market Plunge Roils Markets

The Chinese government is preparing to buy shares of stock to stabilize their markets after a plunge of more than 8 percent on Monday that impacted markets across the world.

The government also threatened to “deal severely” with anyone who is found to be engaging in “malicious shorting of stocks” in the government’s opinion.

The two Chinese markets, the CSI300 and the SSEC lost 8.6% and 8.5% respectively.  Only 13 of the 1,114 stocks on the Shanghai Composite were up after Monday.

“Because of the high, still high leverage exposure of the Chinese markets, anything that triggers a decline in such a short time will see some negative spiral effects in such highly leveraged markets,” Raymond Yeung, senior economist of Greater China at the Australia and New Zealand Banking Group, told VOA.

The Chinese market collapse caused the Dow Industrial Average to fall 150 points at the opening Monday.

“The fear factor of China is very much alive in the market. That’s nearing us to some technical support levels,” said Peter Cardillo, chief market economist at Rockwell Global Capital told CNBC. “Slow growth out of China just complicates the oil picture.”

The Chinese market caused oil to fall below $48 a barrel.

One Chinese market expert says the government should allow the market to correct as Chinese stocks are overpriced.

“The valuation of Chinese [stock] markets remains over-priced, which creates rooms for further downward revisions. The government’s rescue measures could curb the slides in a short term, but are powerless in reversing the long-term trend,” Lu Suiqi, associate professor of economics at Peking University says.

Greek PM Trying To Rally Party Before Key Vote

Greek Prime Minister Alexis Tsipras is attempting to rally his party to gain enough support to pass the second round of key reforms to guarantee a bailout from the European Union (EU) and the International Monetary Fund (IMF).

The rebellion in Parliament is coming from Tsipras’ own Syriza party, who were elected on a platform of not giving in to European demands for more austerity measures.  Tsipras fought the austerity measures for a significant amount of time before admitting some measures needed to be taken to help Greece turn around their economy.

“We are making an effort to have fewer dissenters,” Health Minister Panagiotis Kouroumplis told Greek TV.

The first vote took place on austerity measures while this second vote is more about procedural operations such as a code of civil protection aimed at speeding up court cases;  the adoption of an EU directive to bolster banks and protect savers’ deposits of less than €100,000 and the introduction of rules that would see bank shareholders and creditors – not taxpayers – cover costs of a failed bank.

The issues that caused most division such as phasing out early retirement were removed from the second round of voting and move to an August vote.

The vote is expected to pass thanks to support from the opposition parties in the Parliament.

Greece PM Fighting With Own Parliament Over Bailout Deal

While much of the world celebrated a bailout deal that would keep Greece from entering into bankruptcy and a forced exit from the Euro, the country’s Prime Minister found himself facing a hostile and combative Parliament.

Greece’s PM Alexis Tsipras spent all day Tuesday in contentious meetings with his own party’s members of parliament and the conflict was so severe it was possible he would need to form a new national unity government to get the bailout passed for the nation.

The deal is critical for the nation as they missed a second debt repayment to the International Monetary Fund (IMF) putting them further behind in their debt load.

Over 2 million euro are owned to the IMF by Greece as of Monday.

The nation’s banks have been closed since June 29th and without the deal there is no indication when they could re-open.  Heavy restrictions on ATM transactions remain in place.

The IMF surprised many observers today by releasing a report on the bailout agreement stating the country needs “massively more” debt relief than admitted by eurozone officials.

“The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date – and what has been proposed by the ESM,” the IMF stated.

Greece Bailed Out

Greece has been given the bailout they were seeking for weeks after agreeing to economic reforms.

The $96 billion bailout is the third for Greece since 2010 and should keep the nation in the Euro for the moment.

The key for the deal is that Greece must show concrete steps toward cutting pensions and raising taxes in the nation.  The measures must be passed by the Greek Parliament by Wednesday if the bailout is to progress further.

However, the bailout is drawing fierce criticism from Greek citizens and others who support them.  The hashtag #ThisIsACoup has been trending on social from those who see the demands of the EU as taking over Greece.

“The trending hashtag ThisIsACoup is exactly right,” economist Paul Krugman wrote for the New York Times. “This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief.  It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for.”

One of the elements of the deal is that $56 billion of Greece’s public assets be placed into a truth in Luxembourg, where the proceeds from privatization of the assets would be used to pay the nation’s creditors.

Markets around the world climbed on the news of the bailout deal being offered to Greece.

Germany Caves To International Pressure on Greece

German officials have reportedly given in to the demands of other European nations and banking institutions in regard to money owed them by Greece in what could be a significant step toward ending the Greek debt crisis standoff.

The European Council had been calling the loudest for Germany to make steps toward working with Greece after Chancellor Angela Merkel and other officials took a hard line stance over Greece’s unwillingness to accept austerity measures.

“The realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors,” said Donald Tusk, the European Council president.

Greece submitted a new reform proposal to the EU just two hours before a midnight deadline Thursday.  The plan contains many items that Greek Prime Minister Alexis Tsipras had rejected and urged the nation’s voters to reject in a recent referendum.

The new proposal includes tax increases, reform to pensions and spending cuts.

“The package takes a very substantial step in the right direction, and it should move us closer to a deal,” said Mujtaba Rahman, the Europe director for the Eurasia Group, told the New York Times.  “The question now is whether the Greeks are actually going to implement some of the measures over the course of the weekend by putting them before their Parliament as German officials seems to be demanding.”

German Chancellor Merkel stated later in the day Thursday that she still opposes any debt reduction for Greece as part of the deal.