It seems that two world’s largest economies are so interlaced that malfunction of one is reflected in the other. We are referring to the United States and China. A 4.5% fall in the US S&P 500 followed almost a 7% drop in the Shanghai Composite. The tumble was reported to be the deepest in four trading sessions of 2016. Despite such losses, the People’s Bank of China continues devaluating its national currency.
Economists explain problems of the Chinese stock market by mounting concerns over the future of the world’s second largest economy and general negative sentiment in markets. Meanwhile, gold prices are rising, and this usually indicates hard times. A slump in the Chinese economy led to negative consequences in the global economy and caused a loss of 2.5 trillion of the value of global equities this year. Independent observers say that China’s authorities lack experience in market stabilization and that they only make the situation worse. However, some experts believe that problems in China improve prospects for US stocks.
At the very beginning of 2016, the S&P 500 showed the weakest dynamic since 1928 when the MSCI All-Country World Index had sank by 5.2% in four days. The STOXX Europe 50 has already tumbled by 5% this year just like major indices throughout Asia.
