The angst kicked off with worries about the condition of the Chinese economy and the implications for the broader market shows no signs of abating as volatility across all asset classes continue to persist. Equity markets from Asia to Europe continue to swing wildly which has encouraged a flight of capital to safe haven bonds and currencies.
Starting off with the Asian session, Beijing’s move to temper angst with yesterday’s rate cut only temporarily boosted confidence as we have seen an absolute whipsaw in price action in the Shanghai composite today with the market initially down 3.8%, then recovering 4.3% only for yet another sell off to ensue which brought the index to a close 1.3% lower than the day before. The volatility in Shanghai is symptomatic of the type of instability gripping markets as the Nikkei saw a similar performance while ending the day higher and hopes that Chinese stimulus would drive increased demand allowed Australia’s ASX index to close .7% higher. As repeated attempts by policy makers in China to calm the tempest fail to restore confidence, capital continues to flow to safe haven assets with US dollar denominated assets being the chief beneficiary with the big dollar itself gaining on all of the majors including the Japanese yen, euro and pound sterling.
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