The spike in the 2015-16 stock market , instigated by a global financial event, kicked off in the United States on August 18, 2015, when the Dow Jones Industrial Average fell 33 points and gathered downward momentum for several days, selling steeply on August 21, 2015, falling 531 points (3.12%) on the day.
Wall Street suffered heavy losses on Monday, August 24, when the Dow opened 1,000 points. However, the index regains some of what it has lost to cover 588 points for today. The Dow opened higher on Tuesday, Aug. 25 but fell again in the last hour of trading, leaving the Dow 204 points off the opening bell level. US markets recovered 4% the next day.
Volatility continues into 2016 as more concerns about China's economy and the results of the Great Britain referendum decide whether to leave the EU.
Video 2015-16 stock market selloff
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The substantial concern that leads to global market instability is the long-term monetary shortage in Greece that leads to a Greek default on June 30 on repayment of the International Monetary Fund loan but the decisive trigger for the end of the 2009-15 bull market is the Chinese stock market crash that started in June the same one.
From June 12 to August 24, the Shanghai Composite Index shed 38% of its value, a percentage that Neil Irwin of the New York Times on August 24 called "shocking", especially given the Chinese government's efforts to stem the sell-off. However, Irwin also pointed out that investor concern over perceptions of the end of the US Federal Reserve's quantitative easing policy plays a major role in the ongoing slump, along with falling oil prices, which choke investment in emerging markets, causing resonance. negative global financial effects. Other problems include China devaluing its currency.
Start number
The Dow peaked on May 19, 2015, around 18,400 before slowing down to the lowest level around. 17.504 and then partially recovered to the peak of the secondary closing of 18.102 on July 16.
The stock market slowly slid after that, reaching a low of 17,402.51. NASDAQ peaked on 17 July at 5,219. Shares of Apple peaked at $ 133.00 on Feb. 20, reaching $ 132.37 on July 20 and slumping to $ 105 on August 21.
Maps 2015-16 stock market selloff
Downturn
First drop
Starting August 18 (August 19 for Dow) the selling stance sets the trend. The Dow fell 33 points, (0.19%) and grew in momentum: -0.8% on Aug. 19, -2.1% on Aug. 20 and -3.12% (Dow) and -3.5% (Nasdaq ) on August 21st.
The Dow Jones index fell 888 points over a two-day period, 1300 points from Aug. 18-21.
Black Monday
On Monday, August 24, world stock markets dropped substantially, erasing all gains made in 2015, with commodity-related declines such as oil, which hit six-year lows, copper and most Asian currencies, but Japan Yen, lost value against US Dollar. With the stock market falling on Monday, about ten trillion dollars has been removed from books in global markets since June 3.
An 8 percent drop in China on August 24 was named "Black Monday" by Chinese state media. The term gained widespread use within the next 48 hours.
In India, Sensex posted its biggest one-day fall of 1,624.51 points on Aug. 24, ending a day -5.94%. Indian investors recorded losses worth more than INR 7 lakh crore ( INR 7 trillion (US $ 100 billion)).
In Europe, major stock markets fell at least 3% on Aug. 24. The FTSE lost -4.4% (Ã, Â £ 78bn) but after opening on Aug. 25, it jumped 116 points (1.97%).
The Dow Jones index opened 1,000 points lower on Aug. 24, but rose nearly half in the first 30 minutes. The New York Times uses the term "upheaval" to describe the market situation. It remained down 588 points at the close of trading. Hedge funds, which, for the most part, have long positions on the eve of the crisis, suffered heavy losses as shares like Apple, Citigroup, Facebook and Amazon lost value.
Continued loss in global equity markets
Tuesday August 25 was another day of sharp losses on the Shanghai composite index, which fell 7.6%, making a 40% drop in the market since June. The two-day loss for Shanghai composites is over 15%. Indian Sensex fell 1.600 points on Aug. 24 as the rupee dropped to 66.69 per dollar. It partially recovered before falling 77.24 points on Aug. 31.
In other trades at 25, Asian and European markets finished higher, and the day started with a massive 440 point increase for the Dow; However, profits turned into losses, with the Dow plunging in the last hour to lose more than 200 points for the day, or another 1.3% overall loss.
On Wednesday, August 26, the Shanghai composite index swung wide and ended down 1.3% again. This is despite the lending rate cuts in China. Late in the day before, it was announced that Chinese legal authorities are investigating Citic Securities, the country's largest broker, for the possibility of breaking the law in securities trading. In addition to eight executives at the company under surveillance, a news reporter and member of the China Securities Regulatory Commission was reportedly taken into custody.
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In subsequent trading on August 26, US markets rallied, with three major indices, Dow, NASDAQ and S & amp; P 500 all recorded a rise of about 4%. For the Dow, it is the third largest stock market rally in its history. The Dow also rose another 319 points on Aug. 27, causing the record to be set.
September
On Tuesday, Sept 1, the SSE Composite index in Shanghai fell 1.23 percent, the UK FTSE dropped 3 percent and Germany's DAX index dropped 2.4 percent. In the US, Dow dropped to 16,058.35 points (2.8%) and the Nasdaq fell 140.40 (2.9%). But most markets recovered the next day, September 2.
On September 18, 2015, the DJIA slipped 290 points after a brief and partial multi-week recovery (the Dow has partially recovered (16,700) and so did the Nasdaq.) To 16,384. More selling takes place around the world. Nasdaq down 70 points, FTSE 100 65 and Nikkei 225 362. The reason is the Fed did not raise interest rates at the 16-18 September meeting.
World stock markets continued to fall, with the Dow falling to 16,004 on September 29, 2015. This, coupled with other stocks (FTSE100, Hang Seng Index, Nikkei) fell the same or more, set the stage for billions to be lost.
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As crude fell below $ 27 a barrel, on January 20, 2016, the Dow was down 249 points (565 intraday). FTSE 100 entered the bearish market as it fell 3.62% in one day, as well as several other European markets.
Black Friday and Monday
In February 2016, British Prime Minister David Cameron announced that the Government would recommend that Britain should remain in the EU and that a referendum be held on June 23, marking the official launch of the campaign. He also announced that Parliament will enact secondary legislation related to the European Union Referendum Act 2015 on 22 February. With the official launch, UK Government ministers were then free to campaign on both sides of the argument in rare exceptions to collective responsibility of the Cabinet. The announcement led to the British pound dropping to $ 1,393, the lowest since 2009 and leading uncertainties in stock markets around the world.
On June 14, opinion polls show that Brexit is more likely to cause the FTSE 100 down 2%, losing the value of  £ 98 billion. this poll contributed to the worldwide selling of the market due to Uncertainty of Referendum. After a further poll suggested a move back to Remain, the pound and FTSE recovered. The global market is also recovering.
On the day of the referendum, Sterling reached high 2016 and FTSE 100 rose to 2016 high $ 1.5018 and 6338.10 respectively as the new poll suggested a win for the Fixed campaign. Initial results suggest voting for 'fixed' and the pound value holds its value. However, when the results for Sunderland were announced, it showed an unexpected swing to 'leave'. The next result appears to confirm this swing and sterling fell to $ 1.3777, the lowest level since 1985. However, the following Monday when the market opened, Sterling fell to new lows of $ 1.32.
When the London Stock Exchange opened on the morning of June 24th, the FTSE 100 fell from 6338.10 to 5,806.13 in the first ten minutes of trading. It rebounded to 6091.27 after 90 minutes further before further recovering to 6162.97 in late trading today. When the market reopened on the following Monday, the FTSE 100 showed a steady decline losing more than 2% by mid-afternoon. After opening later on Friday after the referendum, the Dow Jones Industrial Average fell nearly 450 points, or about 2½% in less than half an hour. The Associated Press called the stock market suddenly in this world suffered a setback in the stock market. George Soros even called the Black Friday referendum for England.
Financial markets also react negatively to the outcome, with stock markets all over the world falling. Investors in stock markets around the world lost more than the equivalent of 2 trillion United States dollars on June 24, 2016, making it the worst single-day loss in history. Market losses amounted to a total of 3 trillion US dollars on June 27, 2016. On June 29, 2016, the market has largely recovered. Credit rating of UK state debt downgraded by Standard & amp; Poor, like the EU.
The euro fell nearly four percent against the US dollar, while traditional "safe haven assets" such as gold and Japanese Yen surged. Crude oil prices fell. The CAC 40 seeded France and DAX Germany initially dropped more than 10% at opening, while bank shares from both countries fell more. Likewise, IBEX 35 Spain, ATHEX Greece, the Dutch AEX index, Czech PX Index, and WIG30 Poland are all down eight to 15 percent. The Swiss franc, a traditional safe-haven asset, rose sharply, prompting the Swiss National Bank to intervene in the foreign exchange market to limit gains. It issued a statement which read: "After the British vote to leave the EU, the Swiss franc is under pressure, the Swiss National Bank has intervened in the foreign exchange market to stabilize the situation and will remain active in that market." The yield on state bonds European spikes, with 10-year bonds in Spain and Italy rising as much as 0.40% in early trade. The Swedish Riksbank issued a statement reading it is "keeping abreast of financial markets and having ongoing dialogue with other authorities We have contacts with Swedish banks and other central banks We are ready to take the necessary action to deal with financial market distortions."
In mid-afternoon on June 27, 2016, sterling was at 31-year lows after falling 11% in two trading days and the FTSE 100 had surrendered Ã, £ 85 billion, although on June 29 it has recovered all losses since the market closed on the day of the polls sound.
In the Asia-Pacific region, markets also fell, with the Nikkei 225 leading Asian selloff, down 7.92% to 14,952.02, the biggest selloff since March 2011 and the lowest level since October 2014. Meanwhile, an unnamed official at the Bank of Korea in South Korea refused to comment on the rumors it intervened in the foreign exchange market, but Deputy Finance Minister Choi Sang-Mok said the government would take all efforts to minimize the impact of the results. An unnamed policy maker with knowledge of Reserve Bank of India (RBI) plans for related market management says that "is ready for any volatility." Unnamed officials at SEBI said they were in touch with the RBI on market developments amid increased scrutiny to curb excessive volatility and possible manipulation in various trading segments, including currency derivatives. The Australian dollar, which has traditionally been sold at a time of financial market uncertainty, fell strongly against the dollar and yen. Other traditional signs of uncertainty, such as interbank rates in Singapore and Hong Kong, are more stable. Hong Kong Financial Secretary John Tsang said: "Because of this, we have made preparations in many aspects: We have reserved sufficient liquidity and we can handle in different situations." The Hong Kong Monetary Authority requested banks within its jurisdiction to maintain sufficient cash conditions and that no unscheduled financial liquidity injection operations. Singapore's stock market tries to reduce volatility by increasing margins on the exchange-traded Nikkei futures. China's Yuan fell to its weakest level against the US dollar since January 2011 while its overseas counterpart slumped to its weakest level in more than four months, although there may be a 170 billion yuan injections of People's Bank of China into the system. The Central Bank of the Philippines issued a statement that read it heavily monitor the foreign exchange market and will be ready to act to ensure regular transactions and smooth volatility.
In the US, government bonds effectively set a small FOMC interest rate cut from the July interest rate hike. When the American market opened, there was a drastic decline from Canada to Brazil.
The results of the referendum also have a direct negative economic impact on a number of other countries. South Africa's Rand suffered its biggest one-day decline since the big recession in 2008, falling more than 8% against the US dollar. Other negatively affected countries include Canada, whose stock markets are down 1.70%, Nigeria, and Kenya. This is partly due to a general global financial shift from risky currency and into the US dollar, and partly because of concerns about how UK withdrawal from the EU will have an impact on the economy and trade relations with close economic ties with the United States. Kingdom.
However, in September 2016 the British media have reported that ignoring the so-called 'Project Weakness', has rewarded shareholders with insight to ignore pessimism after the FTSE250 broke all records within months after the referendum to leave the EU.
During a press conference on June 27, 2016, United Kingdom Treasury Secretary George Osborne sought to convince financial markets that the UK economy was not in serious trouble. This came after the media reported that a survey by the Institute of Directors suggested that two-thirds of businesses believe that the results of the referendum would produce negative results as well as the dropping value of sterling and the FTSE 100 that began on Friday, June 24, 2016. British businesses also predicted that investment cuts, freezing freezes and redundancy will be needed to address the outcome of the referendum. Osborne pointed out that Britain faces a "future of force position" and there is no current need for an emergency Budget. "No one doubts our determination to maintain the fiscal stability that we have conveyed to this country.... And for companies, big and small, I would say this: the UK economy is essentially strong, very competitive and we're open to business." Later that afternoon, sterling was at 31-year lows, after falling 11% in two trading days and the FTSE 100 index had given up Ã, £ 85 billion. Trading at Barclays Bank and Royal Bank of Scotland was suspended after their prices fell sharply. At the close of trade, the domestic FTSE 250 index fell by around 14% compared to the day before the results of the referendum were published (June 23, 2016).
On July 1, the FTSE 100 has risen above the pre-referendum level, in fact, up further to a ten-month high. Taking into account the previous fall, this is the biggest one-week gain since 2011. On July 11, it formally entered the bull market area, after rising more than 20% from its February low. However, a weak pound means that when measured in US dollars, the FTSE 100 index remains 6% below the pre-Brexit level. The FTSE 250 index, which contains more British companies and fewer multinationals, is moving above the pre-referendum level on July 27. In the US, S & amp; P 500, a broader market than the Dow Jones, reached its all-time high on July 11. Dow Jones and Nasdaq Composite, both reaching all-time highs on July 12 and August 8 respectively.
It is expected that the weaker pound will benefit aerospace and defense companies, pharmaceutical companies, and professional service firms; the share price of these companies was encouraged after the EU referendum.
The pound remains low, and became the worst-performing currency of the year to date against 31 other major currencies.
Reaction
Some politicians have indicated strong personal opinions about stock market action. Speaking on August 24, German Chancellor Angela Merkel and French President FranÃÆ'§ois Hollande described the world economy as "solid" and expressed confidence that the Chinese market crash and subsequent market changes would subside. Merkel stated "China will do everything in its power to stabilize the economic situation."
On the other hand, US businessmen and candidates for Republican presidential nomination Donald Trump stated on Aug. 24 that he felt that the stock sale could be "messy". Trump criticized the policies that bind China and the US economy together. Also on the 24th, fellow Republican nominee candidate Chris Christie blamed President Obama for borrowing too much money from China, saying that the US and Chinese economies have become "interdependent". Christie commented figuratively that "If the Chinese are caught, we get the flu."
On the day after the referendum, Bank of England Governor Mark Carney said at a press conference:
The capital needs of our largest banks are now 10 times higher than before the financial crisis. The Bank of England has tested these banks with stress on scenarios that are much more severe than our current state. As a result of this action British banks have raised more than Ã, Â £ 130bn of new capital and now have over Ã, Â £ 600bn of high quality liquid assets. That's huge capital and great liquidity gives banks the flexibility they need to continue lending to UK businesses and households even during challenging times In addition, as a barrier to support market functioning, the Bank of England is ready to provide more than £ 250 billion of additional funds through its normal market operations. The Bank of England is also capable of providing substantial liquidity in foreign currency if required. We expect institutions to take advantage of this funding if and when appropriate It took some time for England to build new relationships with Europe and the rest of the world. So some markets and economic volatility can be expected because this process is revealed, but we are ready for this. His Majesty Treasury and the Bank of England have been involved in extensive contingency planning and chancellery and I remain in close contact including through the evening and this morning. The Bank of England will not hesitate to take additional measures as needed, as the market adjusts.
Nevertheless, the share price of the five largest banks in the UK dropped an average of 21% the morning after the referendum. In late Friday trading, both HSBC and Standard Chartered have fully recovered, while Lloyds, RBS Group and Barclays remain down more than 10%.
All Big Three credit rating agencies react negatively to the vote: Standard & amp; Poor's cut Britain's credit rating from AAA to AA, Fitch Group cutting from AA to AA, and Moody slashed Britain's prospects to "negative".
To try to resist the downturn and improve financial stability, on July 5, 2016 the Bank of England released Ã, Â £ 150 billion in loans with reduced countercyclical capital buffer to be held by banks.
Property value crash concerns caused investors to start redeeming investments in property funds, prompting Standard Life to freeze trading on July 4, and Aviva following it the following day. Other investment companies include Henderson Group and M & amp; G Investments cut the amount to be received by investors in their funds.
On July 12, global investment management firm BlackRock expects the UK to recession in late 2016 or early 2017 as a result of a vote to leave the EU, and economic growth will slow for at least five years due to a reduction in UK investment. On July 18, the UK-based economic forecast group, the ITEM EY club, suggested the country would experience a "short shallow recession" because the economy suffers from "a severe confidence effect on spending and business"; it also cut its economic growth forecast for the UK from 2.6% to 0.4% in 2017, and 2.4% to 1.4% for 2018. The group's main economic adviser, Peter Soencer, also believes there will be long-term implications , and that the UK "may have to adjust to permanent reductions in economic size, compared to likely trends before voting". Senior Investor City Richard Buxton also believes there will be a "mild recession". On July 19, the International Monetary Fund (IMF) reduced its 2017 economic growth forecasts for the UK from 2.2% to 1.3%, but still expects Britain to be the second fastest growing economy in the G7 during 2016; The IMF also reduced its forecast for world economic growth by 0.1% to 3.1% in 2016 and 3.4% in 2017, as a result of the referendum, which is said to have "thrown a wrench in the work" of the global recovery.
On July 20, a report released by the Bank of England said that although uncertainty has risen "markedly" since the referendum, it has not seen evidence of a sharp economic downturn as a consequence. However, about a third of the surveyed contacts for the report predicted there would be "some negative impact" during the next year.
References
See also
- 2015 China stock market crash
- EU European Union membership referendum, 2016
- Greek government debt crisis
- List of stock market crashes and bear market
Source of the article : Wikipedia
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