ISEQ drops 6.44% with other European Markets...

johnnyskeleton

...ostensibly in line with the Chinese, US and other world stock markets.

http://www.rte.ie/news/business/2015/0824/723152-china-asia-markets/

Dow Jones has bounced back a fair bit but still seems to be down.

I find these across the board drops in equities to be difficult to understand and a bit worrying. One could reasonably understand if there is a flight from China that they might put the money into European or US markets. However, if they all go down, together with commodities etc, I wonder are institutions reverting to hoarding cash like in 2008?

To my untrained eyes, it certainly seems like a sign that all the QE schemes which were deployed in the US over the last seven years have run their course and yet were still not enough to prop up the economy. Even with the late morning/early afternoon rally it suggests that there are turbulent times ahead.

It wouldn't surprise me if we hear about even more QE schemes being set up in the next few days.

gaius c

It's not really that difficult to understand. China is a massive bubble that is in the process of bursting (6% of investors are illiterate!!!) and fears of contagion are affecting other markets as well.

johnnyskeleton

gaius c wrote: »

It's not really that difficult to understand. China is a massive bubble that is in the process of bursting (6% of investors are illiterate!!!) and fears of contagion are affecting other markets as well.

I suppose the bit I dont understand is that if I have equity nvestments in China and I think China is going to go belly up, surely the rational thing is to transfer my equities investments into a safer economy such as the US or Europe rather than just cash out, buy gold etc.

Perhaps this suggests that if China goes the rest of the world goes too, ie the market is saying that no where is safe for investment if this kind. I can see the logic of commodities falling on foot of this i.e. China is a large consumer of coal, oil, steel etc so demand would drop.

Godge

johnnyskeleton wrote: »

I suppose the bit I dont understand is that if I have equity nvestments in China and I think China is going to go belly up, surely the rational thing is to transfer my equities investments into a safer economy such as the US or Europe rather than just cash out, buy gold etc.

Perhaps this suggests that if China goes the rest of the world goes too, ie the market is saying that no where is safe for investment if this kind. I can see the logic of commodities falling on foot of this i.e. China is a large consumer of coal, oil, steel etc so demand would drop.

Cash out and buy gold, government bonds or property etc. You don't necessarily put your money into equities elsewhere.

Sierra Oscar

The Chinese bubble is one thing but there is uncertainty regarding the Federal Reserve and its plan to increase interest rates. The markets seem spooked by that prospect. The recovery internationally seems fragile and investors recognise this.

Investors also recognise that any financial shock to the international markets this time around could be much worse than 2008 as central banks and Governments have less tools at their disposal to manipulate the market. Interest rates are already close to 0% and have been since 2008. QE is already well underway.

gaius c

Sierra Oscar wrote: »

The Chinese bubble is one thing but there is uncertainty regarding the Federal Reserve and its plan to increase interest rates. The markets seem spooked by that prospect. The recovery internationally seems fragile and investors recognise this.

Investors also recognise that any financial shock to the international markets this time around could be much worse than 2008 as central banks and Governments have less tools at their disposal to manipulate the market. Interest rates are already close to 0% and have been since 2008. QE is already well underway.

The fed have been talking about raising rates for a long time. I stress the "talking" bit.

newacc2015

Godge wrote: »

Cash out and buy gold, government bonds or property etc. You don't necessarily put your money into equities elsewhere.

Gold pays no return and even with all the turmoil recently. It has risen much in price. Generally the price of oil, has a quite a large impact on the price of gold. Oil is at a 6 year low, so excavation of Gold will be quite cheap