China Plunges, Us And Global Equities React
U.S. stocks trimmed declines as energy shares rebounded with oil prices, while equities extended their three-month lows amid Chinese economic jitters that continued to engulf markets around the globe.
Thursday, January 7, 2016 - 00:00
The Dow Jones average fell 300 points early this morning in reaction to a China-fueled global equity rout. This morning in China the markets opened, stocks plummeted and a so-called circuit breaker (that was just introduced this week as a direct consequence to the volatility of last summer) put an end to trading after only 29 minutes. The more than 7% plunge triggered a market-wide halt for the second time this week.
The China Securities Regulatory Commission (CSRC) announced the suspension Thursday night, adding to concern that policymakers in the world’s second-largest economy are struggling to contain the months-long turmoil in its financial markets. The decision came hours after CSRC officials held an emergency meeting to discuss conditions on the nation’s tumbling stock market.
Further adding to investors’ concerns were Wednesday’s North Korea nuclear test, sinking global oil prices, and fears of what may happen once temporary measures that have prevented large Chinese shareholders from selling big stakes expire at the end of the week.
The selloff in global shares that started in China – after the central bank cut the yuan’s reference rate by the most since August -- showed signs of easing late this morning as crude cut its losses by more than half. Oil is currently little changed in New York and London, rebounding from a 12-year low as U.S. equities pare losses. West Texas Intermediate had dropped as much as 5.5% earlier in the day.
The CBOE Volatility Index, the market's favored gauge of Wall Street anxiety, was up 9.8% at 22.66, after opening at its highest level since Dec. 14. The volatility is increased by relatively low volume as some prospective traders appear to be sitting on the sidelines.
In a strong downtrend like this week’s, short-term instruments like binary options can be a way to profit from declining prices. Binary options and spreads make it just as easy to take short positions as long and to take advantage of volatile markets.
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