Market turmoil is real. How severe for how long remains to be seen. Sharp reversals accompany steep declines. No one knows if what’s happening signals the beginning of global markets crashing. Only Cassandra was good at calling tops and bottoms. The fullness of time will explain best of all
STEPHEN LENDMAN | Special to Caravan Daily
[dropcap]A[/dropcap]s this is written, US financial markets haven’t opened. Dow, S&P and Nasdaq futures indicate steep opening declines.
European bourses are down about 3% – following continued sharp Asian market sell-offs – in lockstep with what Reuters called “the Great fall of China.” The Shanghai Composite fell another 8.5% after last week’s steep declines. More on this below.
So far, it’s too soon to know if what’s happening is what the late longtime market expert/Progressive Radio News Hour guest Bob Chapman warned listeners and readers about in his twice-weekly International Forecaster reports.
“There is absolutely no way a financial crisis can be avoided,” he said. “Fragile isn’t the word,” for what’s happening. “The operative (word) is abject failure,” headed for eventual collapse.
“Untenable political and financial decisions put US and European economies on a collision course with disaster. Bailouts and market manipulation delay the inevitable.”
So does money printing madness – facilitating out-of-control speculation. The longer it continues, the more disastrous the consequences.
Chickens eventually come home to roost. Chapman’s insight is sorely missed now. Hindsight is the best foresight. The fullness of time will tell if this is the moment he predicted.
So far, Dow and S&P declines don’t approach previous sell-offs percentage-wise.
On October 19, 1987, the Dow crashed 22.61% (a bear market in one day) – compared to last Friday’s 3% decline and Thursday’s 2% drop.
On October 24, Wall Street’s 1929 crash began – the Dow declining 11% on what’s called BlackThursday, followed by other steep drops.
Before things ended in July 1932, the benchmark average lost 89% of its peak value. It took an entire generation to recoup.
World equity markets have been in bubble territory longterm – artificially elevated by money printing madness. Is China’s crash prelude to global turmoil?
The Financial Times said the Shanghai Composite had its worst day since February 2007 on Monday. It called trading “tumultuous.”
China’s Xinhua news agency called it “Black Monday.” The “rout” spread to other Asian markets and Europe’s. London’s FTSE fell to its lowest level since June 2013.
“Monday’s moves left Europe’s main stock benchmarks on track for their worst monthly declines since October 2008, at the height of the financial crisis,” said the FT.
China’s currency devaluation two weeks ago signaled economic weakness. Its economy “might be in worse shape than previously thought,” said the FT.
It’s been the world’s leading growth engine. Any slowdown has huge implications for other world economies.
IG market analyst Angus Nicholson called its equity market in “free-fall, (its) banking system increasingly starved of liquidity, rising capital outflows and a rapidly slowing economy.”
When China sneezes, the world catches cold. On Monday, an astonishing 900 of 1,114 listed Shanghai Composite stocks were down nearly 10%. Just five equity listings rose in value.
The day’s understatement came from Credit Agricole analysts saying: “Caution remains warranted” – highlighted by the Wall Street Journal’s online front page reporting:
“Markets Rout Continues; China Shares Fall 8.5%; Oil Hits New Lows.”
“The rout in financial markets showed no sign of easing Monday, as global stocks and commodities extended last week’s steep declines.”
“Mining Shares Sink Deep
China Shares Erase Year’s Gain
Oil Tumbles to Fresh Lows
Gold Falls, Despite Safe-Haven Status
Copper, Aluminum Tumble to Fresh Lows
Russian Ruble Sinks to Seven-Month Lows”
Not a pretty picture. Market turmoil is real. How severe for how long remains to be seen. Sharp reversals accompany steep declines.
No one knows if what’s happening signals the beginning of global markets crashing. Only Cassandra was good at calling tops and bottoms. The fullness of time will explain best of all.