How China's Black Monday could affect global economies
By Ravender Sembhy August 24, 2015 14:11 BST
After the Chinese stock market suffered its biggest one day loss since 2007, plummeting 8.5%, the country's media have dubbed today "Black Monday". The ripple effect has been felt across the globe, with indices nosediving one after the other.
The FTSE 100 fell below the 6,000 mark for the first time since 2013, and Japan's Nikkei, the German DAX and France's CAC all followed suit in recording heavy losses.
The Shanghai Composite lost gains made in 2015, plunging 8.5%.
Why is this happening?
Slowing growth in the world's second largest economy has been spooking investors since the beginning of the year, which has contributed to the loss.
China is targeting growth of 7% in 2015, down from 7.4% in 2014, as the country attempts to move from an export-led economy to one more focused on consumer spending. However, there are now worries it will fail to hit forecasts and economic data come in weaker.
Earlier in 2015, investors signalled their concern about the slowdown by embarking on a selling frenzy that wiped out more than 30% – some $3tn (£1.9tn, €2.7tn) – of China's equity market value in one month. The Chinese government has responded by injecting billions into blue chip stocks, permitting its state pension fund to invest in domestic shares for the first time and by devaluing its currency in a bid to boost exports.
But none of these actions appears to have had the desired effect. Instead, the reaction from investors has been to sell off stocks, causing bourses around the globe to plummet.
Jim Reid of Deutsche Bank said: "This morning's rout in Asia comes after hopes that more government support in China could be around the corner, although the lack of any state intervention first thing this morning is seemingly exaggerating the pain in markets."
Commodities