US markets tumbled on fears of worldwide economic slowdown

European stock sell-off intensified amid global growth concerns

European equity markets continued to plummet last week, as markets are increasingly worried about global economic growth perspectives on the back of disappointing data from China and uncertainty over expected hike of the Federal Funds rate in the US. A rout began in emerging world; however, it has quickly spread over other markets in developed world. Europe’s fundamentals used to have little impact on the markets throughout the previous week, but several indicators including weak French manufacturing PMI signaled that recovery in the Euro zone may not be as strong as anticipated.

All in all, the Eurostoxx 50 Index slumped 6.7% to 337.73 points last week, pushing the monthly loss down to 9.7%. Other indices including DAX ad FTSE 100 plunged as well by 7.5% and 5.5%, respectively. No components of the pan-European equity index showed any positive trend, as the main outperformer declined as much as 5.1% (Real Estate), while financials were down the most by 8%. Among the worst weekly performers we have again seen Greek market participants, with the National Bank of Greece losing 23.2% to trade near all-time lows of 0.47 euros per share. A renewable-energy company Abengoa SA slid 20.3% to 1.63 euros, as the company continued problematic talks concerning fundraising, while some investors filed a lawsuit against Abengoa due to violations of US Federal Securities Laws. On the other hand, a Wales, UK-based insurance company Admiral Group Plc gained the most in three months of 8.4% to 1,561 pence last week, as it reported an unexpected increase first-half profit.

US markets tumbled on fears of worldwide economic slowdown

Wall Street followed other global stock markets across the globe and came under intensive sell-off, as investors see risks in economic recovery in the Euro zone and weakness in China. Moreover, the bets on Fed’s first monetary policy tightening round in September are rapidly decreasing, with probability of a hike falling below 40%, down from more than 50% expected before the latest FOMC meeting minutes were published.

Shares of public companies took a major hit last Friday, with Dow Jones Industrial Average losing more than 500 points to close the trading week at 16,459.75 points. Over the reported weekly period the indicator slipped 6.2%. Meanwhile, both NASDAQ and S&P 500 indices lost 6.3% and 7.6% to reach 4,706.04 and 1,970.89 points, accordingly. Meanwhile, the DJIA entered a correction phase after dipping more than 10% since its most recent peak. Among companies, Netflix Inc. was down 15.8% to $103.96 per share. An Internet TV network provider was strongly negatively impacted by overall media industry’s outlook and massive sell-offs that followed Q2 earnings reports. A semiconductors’ producer Sandisk Corp crashed 15.4% to hover at $49.05 by Friday evening, while being influenced by a downgrade from the Bank of America/Merrill Lynch, which cut the company rating from “buy” to “underperform”, underlying Sandisk’s high capital expenditures. Meanwhile, Newmont Mining Corp added 4.6% to $18.14 and was the only S&P 500 component to rally more than 2%, as gold prices continued to rise and thus supported the miner’s equity prices.

Yuan devaluation spurred Asian selling, NZ shares remained above zero

Turbulence in financial markets was noticeably high during the previous trading week ended August 21. The main chart showing a three-month development of Hong Kong, Australian and New Zealand stock markets is clearly reflecting the massiveness of a sell-off that took place in the past five working days. A decline and instability started after the People’s Bank of China decided to devalue the national currency Yuan, while volatility was spread across global equity markets and questioned both European recovery, particularly the exports component, and Fed rate rise in September. Overall, more than $3.3 trillion was erased from global stock markets since the PBoC decision.

In Asia, last week was strongly negative for Hong Kong and Australian equities, with Hang Seng and S&P/ASX 200 plummeting 5.9% and 2.9% to 21,251.57 and 5,001.30 points, correspondingly. Among the sectors, which are included in the latter index, only technology and consumer staples managed to add value over the working week, but an increase was less than one percentage point. Australian mining and oil production companies were sold-off the most, while WTI prices dropped below $40 per barrel for the first time since 2009. In particular, a Brisbane-based Senex Energy Ltd tumbled 23.7% to A$0.15 per share. Other basic materials’ manufacturer, Arrium Ltd, followed with a decrease of 19.2% to just A$0.11.

In the meantime, New Zealand’s stock market has even posted a rise of 0.4% to 5,751.19 points last week, while keeping a marginal 0.04% advance for the past six months.

EXPLANATIONS

Indexes

• Standard & Poor's 500 Index (S&P 500) or (SPX) - U.S. stock market index consisting of the 500 large-cap shares widely traded on the New York Stock Exchange and the NASDAQ.

• Dow Jones Industrial Average Index (INDU) - U.S. stock market index consisting of the 30 large publicly owned U.S. companies , primarily industrials

• NASDAQ Composite Index - U.S. stock market index representing all the stocks that are traded on the Nasdaq stock market, mostly technology and Internet-related

• New Zealand Exchange 50 Gross Index (NZX 50) - stock market index consisting of the top 50 companies listed on the New Zealand Stock exchange

• S&P/ASX 200 -a market-capitalization weighted stock market index of stocks listed on the Australian Securities Exchange from Standard and Poor’s

• Hang Seng Index (HI) - Hong Kong’s stock market index consisting of 48 largest companies listed on the Hong Kong Exchange

• Japan’s Nikkei Stock Average (Nikkei 225 Index) or (NKY) - Japanese stock market index consisting of the 225 largest companies listed on Tokyo Stock Exchange

• FTSE 100 Index (UKX) - U.K. stock market index consisting of the 100 most capitalized U.K. companies trading on the London Stock Exchange

• DAX Index (DAX) - German stock market index consisting of the 30 largest and most liquid German companies trading on the Frankfurt Stock Exchange

• Eurostoxx 600 - stock market index, derived from the Stoxx Europe Total Market Index, consisting of 600 large, mid– and small-sized companies from 18 European countries

Chart

• Correlation - statistical measure of the linear relationship between two random variables. It is defined as the covariance divided by the standard deviation of two variables.

• Historical price changes - chart reflecting the historical price changes of particular region’s stock indices

Indicators

• Industry performance - weekly performance of industries within the particular stock market index

• Top performers - companies within a particular stock market index showing the best or worst weekly performance

• Performance - relative historical change of stock market index value