Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Markets Seek A Bottom As China Bursts The Global Asset Bubble

Published 08/26/2015, 06:14 AM
Updated 04/25/2018, 04:10 AM

Traders made a sharp U-turn as the PBoC cut the RRR and the lending rate to curb the sell-off in Chinese stock markets. Chinese stocks were better bid in Asia but gains remained contained as the margin requirements were increased on stock index futures in addition to restrictions to daily open positions and higher transaction fees.

The idea is to avoid short-term volatilities and overheating in leveraged trades to improve financial stability. Everybody could see the excessive inflation in Shanghai’s stocks since September last year, yet enhancing gains were too sweet to step out pre-maturely. The new restrictions have kept the Chinese stocks safe from speculative in-and-outs. Shanghai’s Composite lost another 1.27% and closed the session below the 3000 mark. As we certainly approach the bottom of this historical sell-off - that has kicked off in June and wiped out more than 40% off the all-time highs – the recovery is expected to happen in a calmer fashion.

The European equity markets opened in red. The FTSE 100 index lost more than 1% in London, mostly lead by oil companies. BP (LONDON:BP), Royal Dutch Shell A (NYSE:RDSa) and Bunge Limited (NYSE:BG) traded 1.50% lower as the recovery in WTI and Brent futures are being challenged at $40 and $45 respectively.

As many doubted, the past years gains in equity markets might have been nothing but an asset bubble. The correction will hopefully bring prices to levels representative of macro and micro fundamentals. It is however too early to predict the bottom.

Today’s equity highlights by Brenda Kelly, LCG’s Head Analysts:

Just when it seemed that price manipulation scandals were finally behind us, the EU is said to be investigating precious metals trading operations in at least 10 banks, including Deutsche, HSBC Holdings PLC (LONDON:HSBA) and Barclays (LONDON:BARC). The commission is alleging anti-competitive spot trading in the likes of gold and silver.

HSBC (-1.61%)

Barclays (-1.38%)
Recent swings in oil prices and the fact that the trajectory seems firmly biased to the downside is weighing on oil companies today. A fairly negative note from JP Morgan in respect of the oil market is leaving a mark today.

Royal Dutch Shell (LONDON:RDSa) (-2.04%)

BP (-2.18%) – The oil company has been accused of manipulating natural gas prices . BP has until August 28th to answer the initial pleading.

WPP (LONDON:WPP) (-0.66%) reported first-half like-for-like net sales up 2.3 percent and reiterated its target for full-year revenue, net sales growth and operating margin. The shares have essentially lost all gains year to date dropping back to 1300p earlier this week. With a high average price target of 1668 and the majority of brokers bullish, we may continue to see a bounce from here.

Vodafone Group (LONDON:VOD) PLC (NASDAQ:VOD): (-1.46%) the telecommunications firm has agreed to buy wireless spectrum rights from Qualcomm (NASDAQ:QCOM) Inc in conjunction with CK Hutchison Holdings.

SABMiller PLC (LONDON:SAB) (-3.06%) SABMiller’s massive exposure to emerging markets, where currencies have been hammered by foreign exchange movements is taking its toll.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.