Specialist Mario Picone (right) watches the numbers as he works on the floor of the New York Stock Exchange, on August 21, 2015. Investors wondered whether that meant the growth here is fragile, and started selling stocks. Oil field company Halliburton was neck and neck with Netflix for the title of worst performing stock this week. That’s the longest losing streak for oil since 1986, a time when OPEC drove the price down as low as $10 a barrel.
Emerging market equity funds have experienced seven straight weeks of investment outflows and debt funds posted their biggest outflow last week since January 2014, Bank of America Merrill Lynch says. “This is about growth”. It was also down 5.8 percent for the week, the steepest weekly drop since September 2011.
The new plunge followed Beijing’s surprise announcement last week that it would devalue its currency, adding to fresh worries over China’s sagging demand and pushing commodity prices further down.
China’s manufacturing sector shrank at its fastest rate in more than six years in August, according to a survey from private data vendor Caixin/Markit. The S&P 500 slid 64.84 points, or 3.19 per cent, to 1,970.89 and the Nasdaq Composite lost 171.45 points, or 3.52 per cent, to 4,706.04.
All told, the Dow is down 10 percent from it’s historic May high. Germany’s DAX declined 0.5%, which was some 16% below record highs reached in April.
Experts differ on whether this is stock market pullback is a buying opportunity or the start of a deeper rut for stocks. “Sometimes things get worse”. Earlier this month, its yuan currency weakened against the US dollar. “But there doesn’t seem to be any signal that the weakness overseas is slipping into the U.S. economy“. Still, many analysts see the U.S. market downturn as an overdue correction, which might continue into next week.
These measures have not been enough, as China’s overnight money market rates have continued to inch upward. The central bank may try to estimate the impact of a falling stock market on the wealth and spending habits of U.S. households. It has not been lower since the height of the financial crisis in March 2009.
Investors are also concerned about predictions that the U.S. Federal Reserve Board will raise a key interest rate as early as September.
“They have the luxury of being able to wait and see what happens”, Perli said. “Asian markets are a sea of red”, said Angus Nicholson of IG Markets in a report.
If the Chinese economy – the world’s second largest – decelerates, it will cause not only decreases in exports from major economies to China but will also adversely affect emerging economies in Asia. In Britain, the FTSE 100 index dropped 2.8%.
Stocks in China dropped, with the Shanghai Composite Index finishing down 4.3 percent. Japan’s Nikkei 225 lost 3 percent, South Korea’s Kospi shed 2 percent and Hong Kong’s Hang Seng fell 1.5 percent in Friday trade. The yield of the 10-year U.S. Treasury note fell to 2.05 percent Friday from 2.07 percent Thursday.
Oil briefly fell below $40 a barrel on Friday, the first time that price has fallen to that level in more than five years. Brent crude for October delivery was down more than 1% at $46.02 by lunchtime in London.
US shares headed sharply lower for a third day on Friday. Investors who once flocked to emerging-markets like Brazil and Russian Federation now shun them.
Some argue that this isn’t necessarily bad news.