After China’s “Black Monday” sent markets wobbling all around the world, hundreds of billions were wiped off the world’s financial markets.
The effects of China’s stock market turmoil has rippled through to Europe, Asia, and the U.S. where shares are dropping.
The Dow Jones index dropped 588 points on Monday, while the S&P seemed to be heading for correction.
The VIX “fear index” is in the highs, and the Chinese stock market fell another 8.5 percent—it’s biggest fall since 2007.
After the People’s Bank of China (PBoC) finally took action and cut interest rates, shares across Europe started rising and seem to be recovering most of Monday’s losses. Some experts claim that this is a hard lesson learned for China’s communist regime, challenging it’s opinion that it can control everything.
Other experts find the cuts made by the PBoC positive, but not enough and not transparent: “The PBoC must do more and must explain what it’s doing more,” says David Goldman of Reorient, a Asia-focused financial services group.
Financial experts like Tao Dong of Credit Suisse believe that the PBoC’s priority should be to fix the economy rather than pampering the stock market.
Chief regional economist at Credit Suisse, Tao Dong, told Bloomberg: “Clearly, this is targeted at the falling stock market. China needs extra liquidity to prevent systemic risks. But ultimately, fixing the economy is more important than fixing the stock market, and advancing reforms is critical.”
According to Bloomberg’s Fergus Ryan, who experienced the atmosphere in a trading room in Beijing, “where small investors are shell-shocked as they watched share prices tumble again today,” many traders were totally focused on what was happening to their hardly earned fortunes.
“Don’t bother me, I’m trying to focus,” said one middle-aged lady. “I lived through wars, but nothing as horrible as this,” replied an elderly man.
While some skeptics believe that this is the “the coming collapse of China,” as predicted by Gordan Chang 15 years ago, others are optimistic, believing this is only one of many hiccups and the government will fix it “like they always fix things.”
It seems that we can only wait to see the true outcome, and what Fortuna has in store for us.