Stock markets around the globe tumbled during Friday’s trading session after a survey showed that Chinese factories contracted at their fastest pace since the depth of the global financial crisis in 2009 sending investors around the global to the safety of bonds and gold and has traders on the edge of their seats with regards to how financial markets would react come next week after the steep fall seen on the Dow Jones Industrial Average in the overnight session. It is important to point towards the fact that the Dow Jones is about a percentage point away from entering a correction.
Emerging market assets took a hammering and oil prices slipped below the $40 mark and were on track for their longest losing streak since 1986 as many investors fear a China driven deceleration in global growth gripped markets. Shanghai stocks dropped 4 percent and fell below their 200 day moving average for the first time since July 2014. It is imperative to state that the drop brought total losses for the week to 11 percent which is being seen as a huge negative. Markets in countries whose economic fortunes are closely linked to China’s growth plunged during the trading session.
European shares followed suit. Reports coming out of Greece of Prime Minister Alexis Tsipras resigning was seen as a huge negative as it would lead to bigger political turmoil around the region. The major indices in the US plunged below their 200 day moving averages which is being seen as a huge negative and is indicative of the strong selling momentum present at current levels. Many traders believe that the current plunge in global equities could continue in the near term as all eyes are on the central bankers around the world with hopes of further easing measures in the near term.