Aug 24th 2015, major sell-off of equities across the globe

Athens, August 24th,

Global markets: This week started with a major sell-off of equities across Far East.

• Although this crisis is China centric (-8,48% Sanghai), it impacted all neighbouring economies and gradually equity markets across the globe.
• The main reason behind today’s sell-off is the soft fundamentals of Chinese economy. Nevertheless, this crisis doesn’t only impact China’s local demand/economy but due to the size of No 2 global economy, it causes the plunge of commodity prices at global level. The most important development is the reduction of price of oil (WTI) at levels below $40 per barrel and Brent at around  $45 per barrel.
• For instance, significant economies such as Brazil, Russia and South Africa which are major exporters of commodities have been impacted significantly from this crisis. In additiona, the depreciation of chinese currency will impact economies which compete with China as regards exports.
• The Asian markets’ turmoil, also impacted european equities which had their worst day since 2008 i.e Stoxx Europe 600 fell by 5.3%, earlier losing as much as 8.1%.
• The crisis crossed Atlantic and Dow plunged as much as 1,000 points at the open on Monday but gradually started to recover. US Dollar plunged at a 7 month low vs. european currency; it was initially traded above 1.17 before dropping below 1.16. Although market selloff has nothing to do with US economy, there are significant concerns as regards a delay of the decision of FED to raise interest rates.
• On the other hand, the recent strengthening of euro is based on three main reasons: a) euro is the no 2 reserve currency globally and acts as a safe heaven b) recent structural reforms across eurozone have enhanced european economy’s competitiveness and c) market developments increase the probability of a delay as regards FED’s decision of US interest rates. As a result, this will bring the eur/usd exchange rate to higher evaluation levels.