Monkey Business In Stock Markets

2016 has seen a volatile start for stocks and it seems to be gathering pace. Directly off the back of the Chinese New Year, china stocks fell dramatically, following the global stock markets. This is the year of the Monkey according to the Chinese calendar and one of the key characteristics is mischievousness – let’s see what mischief has been going on in the stocks markets.

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Here’s what happened

  • After being closed for a week, the Shanghai Composite Index opened on Monday with losses 0.6%
  • The Japanese stock markets nosedived last Thursday, and the Nikkei 225 went through a stormy week as it decreased by more than 11% – its worst week since October 2008.
  • Shares of some of the nation’s major carmakers decreased significantly including Toyota’s decrease of more than 6% and Nissan’s 5.5% loss.
  • London’s FTSE 100 on Thursday fell by 1% to 5,519.5. The German DAX 30 traded with losses of 0.5% and the French CAC 40 dropped and 1.8%.

Fundamentals seem to be in the driver’s seat

  • The global markets are a blend of discouraging economic fundamentals and negative sentiment among investors
  • Major indices across the globe also posted noteworthy losses given the ongoing anxiety surrounding crude oil prices and the performance of the U.S. economy.
  • Fed Chairwoman, Janet Yellen, said that the financial conditions in the U.S. became less supportive of growth by pointing to lower share prices and the increase of lending interest rates.
  • Eurozone’s largest economies are still affected by the financial crisis with last week’s industrial production data dropping – Germany by 2.2%, Italy dropped 0.7%, and France dropped 1.6%
  • Data out of China confirmed the slowing economy with exports falling 6.6% and imports falling 14.4%

What’s next for the markets?

  • Uninspiring fundamentals and risk-off sentiment are not only holding investors back from entering the stock markets, but also leading to a selloff in the fear of further drops.
  • On the other hand, there is another group of investors who view the recent fall in major stock markets as a good opportunity to enter as they forecast an upwards trend reversal.
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Disclosure: None.

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