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Volatility Shakes Up Complacent Markets   August 24 - August 28
Fri, 28 Aug 04:31 PM EST/09:31 PM GMT
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After China refrained from expected stimulus moves over the weekend, global markets went into hysterics on Monday morning. Chinese stocks went negative on the year, helping to trigger a mini flash on at the New York open, sending the S&P 500 into its first correction in three years. China fears hit emerging markets again, exacerbating tensions in the market that were already on edge about the uncertainties surrounding an impending Fed rate hike. Chinese stimulus finally materialized after the Shanghai market closed on Tuesday, helping to reverse US stocks that morning though they retested the Monday lows by the end of the session. The fever broke on Wednesday as Chinese stocks stabilized, and bargain hunters began pouring in, sending most global equity markets higher through the back half of the week. Trading volumes remained very heavy during what is normally a quiet late August week and currency and commodity markets experienced wild volatility spikes as well. By the end of a week that shook complacent markets, the DJIA ended with a 1.1% gain, the S&P500 was up 0.9%, and the Nasdaq added 2.6%.

With markets on fire, all eyes were on Beijing to do something (chatter favored a big, meaty Reserve Ratio Requirement cut) before the open of trade on Monday to stop the bleeding. China's policy response did not impress: regulators said China's national pension fund was now authorized to invest in the stock market, and the stock slide continued unabated. The action was so bad that Apple CEO Cook was compelled to release a statement to help calm markets saying the company was seeing strong growth in China in July and August, with iPhone activations up over recent weeks. No further extraordinary Chinese actions arrived during the Asia session on Tuesday and the Shanghai tanked another 7.6%. With the smell of fear everywhere, the PBoC finally stepped in with a 50 basis point RRR cut and lowered key deposit and lending rates, in a move that seemed to be timed to trap the short sellers that the government has been railing against. ...
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