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European Stocks Slump To 21-Month Low, Wall Street Braces

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European stocks slumped to a 21-month low on Thursday after Wall Street’s worst losses in eight months triggered a surge of global selling that also hit Asia and emerging markets.

Losses in London, Paris and Milan were at nearly 2 percent ahead of what looked set to be another early dive from Wall Street, although it wasn’t quite as dramatic as the overnight session in Asia.

MSCI’s broadest index of Asian shares not including Japan ended down 3.6 percent, having struck its lowest level since March 2017. China’s main indexes had slumped over 5 percent.

It meant MSCI’s 24-country emerging market index .MSCIEF was having its worst day since early 2016, after Wall Street’s swoon had given the 47-country world index equivalent .WORLD its worst day since February.

“Equity markets are locked in a sharp sell-off, with concern around how far yields will rise, warnings from the IMF about financial stability risks and continued trade tension all driving uncertainty,” summed up analysts at ANZ.

The sell-off, which came as the head of the International Monetary Fund, Christine Lagarde, said stock market valuations have been “extremely high”, erased hundreds of billions of dollars of global wealth.

Japan’s Nikkei ended down 3.9 percent, its steepest daily drop since March. The broader TOPIX lost around $207 billion in market value, falling 3.5 percent.

Shanghai’s drop was its most severe since February 2016 and left it at its lowest level since late 2014. Shares in Taiwan were even harder hit, losing 6.3 percent. Seoul’s Kospi index dropped 3.8 percent.

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“I think what happened was that we were a maximum elevation of risk appetite and maximum valuation of (U.S.) large caps and tech, so when you have that situation you are always vulnerable,” said UBP macro and FX strategist Koon Chow.

Europe’s traders retreated to the safety of German and other higher-rated government bonds.

Italian bonds aren’t on that list though, and though they squeezed through a 6.5 billion euro debt sale, they saw more selling amid ongoing concern about the country’s financial health.

“It remains to be seen whether the accelerating equity plunge is a healthy correction or the tip of the iceberg,” Commerzbank analysts said in a note.

BLOOD ON THE STREET

Sinking global shares had raised the stakes for U.S. inflation figures which ended up coming in relatively tame. High inflation would only stoke speculation of more aggressive rate hikes from the Federal Reserve – one of the things that has spooked markets.

On Wall Street, the S&P500’s sharpest one-day fall since February on Tuesday had wiped out around $850 billion as the S&P toppled over 3 percent and the Nasdaq’s high-flying tech shares tumbled even more on fears of slowing demand.

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The bloodletting attracted the attention of U.S. President Donald Trump, who pointed an accusing finger at the Fed for raising interest rates.

“I really disagree with what the Fed is doing,” Trump told reporters before a political rally in Pennsylvania. “I think the Fed has gone crazy”.

Hawkish commentary from Fed policymakers triggered the sell- off in Treasuries last week and sent long-term yields to their highest in seven years.

The surge made stocks look less attractive compared with bonds while also threatening to curb economic activity and profits.

“The rise in Treasury yields has been the primary catalyst for the sell-off in equities, since higher yields suggest a lower present value of future dividend streams, assuming an unchanged economic outlook,” said Steven Friedman, senior economist at BNP Paribas Asset Management.

“It is also possible that equity investors are growing concerned that the Federal Reserve’s projected rate path will choke off the expansion.”

YUAN A FLASHPOINT

The shift in yields is also sucking funds out of emerging markets. More than $1 trillion has been wiped off MSCI’s EM index since January and there has been particular pressure on the Chinese yuan as Beijing fights a protracted trade battle with the United States.

China’s central bank has been allowing the yuan to gradually decline, breaking the 6.9000 barrier and leading speculators to push the dollar up to 6.9377.

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China’s move has forced other emerging-market currencies to weaken to stay competitive and drawn the ire of the United States, which sees it as an unfair devaluation.

“The yuan has already weakened significantly, to offset the tariffs announced so far,” said Alan Ruskin, Deutsche’s global head of G10 FX strategy. “Further weakness could exacerbate concerns of a self-fulfilling flight of capital and a loss of control.”

The dollar was already losing ground to both the yen and the euro, as investors favored currencies of countries that boasted large current account surpluses.

The euro was at $1.1550, up from a low of $1.1429 early in the week. The dollar lapsed to 112.17 yen, a retreat from last week’s 114.54 peak.

That left the dollar at 95.263 .DXY against a basket of currencies.

In commodity markets, gold struggled to get any safety bid and edged down to $1,192.77.

Oil prices skidded in line with U.S. equity markets, even though energy traders worried about shrinking Iranian supply from U.S. sanctions and kept an eye on Hurricane Michael, which shut down some U.S. Gulf of Mexico oil output.

Brent crude LCOc1 fell 1.6 percent to $81.75 a barrel. U.S. crude dropped 1.5 percent to $72.07 CLc1.

Business News

Boeing Shares Continue To Slide As Countries Ground 737 MAX Planes

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Boeing Shares Continue To Slide As Countries Ground 737 MAX Planes

Boeing shares have continued to slide on Tuesday as a growing list of countries move to ground the aircraft manufacturer’s 737 MAX model jets after the crash of an Ethiopian Airlines flight on Sunday killing a hundred fifty-seven persons.

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Boeing’s stock price has fallen nearly twelve percent since the accident, erasing roughly twenty-eight billion dollars in value amid concerns the accident could have links to last October’s crash of a 737 MAX 8 operated by Indonesia’s Lion Air. A hundred eighty-nine persons died in that one.

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Although experts warn that it’s too early to know what caused the Ethiopian Airlines crash, both crashes occurred shortly after takeoff. Experts say, that suggests a possible connection.

Bloomberg reports the Boeing 737 is the best selling aircraft in history.  The MAX is its newest version, with more fuel-efficient engines.  It is also generates almost one-third of the airline maker’s operating profit.

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Business News

SA Banks Stop Supply Of US Dollars To Zimbabwe

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SA Banks Stop Supply Of US Dollar To Zimbabwe

South African banks have stopped supplying Zimbabwe with U.S Dollar notes saying they want to avoid risk. They cite Zimbabwe`s loss of a hundred correspondent banking relationships in the past few years because of the country`s high risk rating.

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South African banks have been the major sources of U.S dollars for Zimbabwe since 2009.

Zimbabwe Reserve Bank Director, William Wanimanzi says the development is a result of the country`s failure to follow proper dollarization procedures, signs of which he said are now catching up with the country`s fragile economy. He said the country is not officially dollarized because it does not have an agreement with the United States government to use its currency. He says this will make it difficult to take in cash into the economy.

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African News

Zimbabwe Central Bank Abandons Quasi Dollar

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Zimbabwe Central Bank Abandons Quasi Dollar

Zimbabwe Central Bank has abandoned the quasi dollar it introduced in 2016.  The peg of one Zimbabwe dollar to one US dollar has not worked as the black market rate has been in the range of three and a half to four Zimbabwe dollars to one U.S. dollar.

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Economists say this move could lead to jitters in countries that hold the peg, including Saudi Arabia and Hong Kong.

Zimbabwe has long been dealing with currency instability that in 2009, it introduced the US dollar, euro, and the South African rand as legal tenders it thought would stem the wild round of hyper-inflation.

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