An update to United States expansion figures has shown the economy grew more than previously thought through the second quarter of the year, giving markets a much needed boost as shares and oil prices both soared by nearly 10 percent.
The revision shows that the economy expanded at a rate of 3.8 percent annualized, representing a 2.4 percent upward revision to primary data. The first quarter results were not changed.
Many analysts say the revision is down to much increased corporate investment, especially from Asian conglomerates into America, and this was backed up by comments from the director of Japanese headquartered investment firm CITIC Tokyo International at a recent economic conference in Beijing, where he said capital investments stateside had risen by 15 percent compared to Q1.
There was also positive news regarding inventories, which were higher than initially predicted by the Commerce Department.
Moral among investors has been low on the back of a chaotic week that saw markets falling badly in response to heightened fears that the world’s second largest economy, China, was faltering. So the current news was more than welcome and the revision was much higher than most expected.
“To be honest it’s just what the doctor ordered for investors around the world, and in the U.S. in particular,” said Close Brothers Asset Management’s head of strategies, Nancy Curtin, in a phone interview for Bloomberg yesterday. “The markets have been more turbulent than usual amid fears of China’s slowdown, so the GDP revision is a much needed boost to confidence.”
In response to the news, oil prices soared from their 6-year low point by 11 percent, but prices were still below the $50 benchmark despite the gains. Shares also rose significantly, adding to an already stellar morning session in the stock markets. The major European exchanges all closed up more than 4 percent, with Wall Street also improving as the Dow Jones rose 366.73 points.
Revisions to the official figures are important as they are a key signal as to whether the Federal Reserve will look to change interest rates. Board members had been particularly coy on any firm announcements recently but the general sentiment has been to hold off on any hike due to the turbulent nature of the stock markets and China’s economic woes.
The current news might be an influencing factor, and some observers say the Fed may be thinking about a rate rise within the next three to six months on the back of the GDP revision.
Thursday, 27 August 2015
Monday, 24 August 2015
Chinese slowdown a headache for markets
Investors around the world continue to be spooked by the economic woes of China, and stock markets have taken a steep nosedive as a result.
All the major markets in Europe dropped by around 5 percent including London's FTSE 100 index which closed down 4.7 percent at 5,898.86 with losses essentially wiping over 70 billion pounds from the index due to the falls.
In a manic day in New York, the Dow Jones dropped 7 percent, and although it fought well to recover half the losses it still closed down 3.5 percent. Traders looked on in despair as the Dow fell below 16,000 for the first time in 2-years before its miraculous recovery late in the afternoon.
The Nadaq sank 9 percent but recovered to post only a 3.4 percent loss at closing, while the S&P 500 also lost 4 percent.
Chinese markets fared no better with the Shanghai Composite suffering its worst closing for 7-years with a 9 percent loss. Trading firm CITIC Tokyo International announced it was revising its Chinese capital inflow plan at the end of the hectic day.
Almost 100 billion pounds were wiped off the FTSE before the semi-recovery, and traders in the U.S. were aware that this wasn’t going to be the usual quiet Monday on the floor even before the New York stock exchange opened and the Dow plunged a monumental 1090 points, a record point’s drop.
A sharp slowdown in China, the world’s second largest economy, has set investors on edge in recent months. The sense of panic was palpable and one floor trader mentioned that he had bitten through all his fingernails just minutes after the opening bell in New York.
Another trader said the short-term outlook seemed bleak but that it didn’t feel to him like a re-run of the 1987 crash. Deep Value chief analyst Stephen Guilfoyle said, “Tensions are high and it looks like the markets are looking down the barrel, but I remember 1987 and this is nothing like it.”
Guilfoyle’s remarks proved true as US markets stormed back late in the day to reduce the losses by nearly half.
All the major markets in Europe dropped by around 5 percent including London's FTSE 100 index which closed down 4.7 percent at 5,898.86 with losses essentially wiping over 70 billion pounds from the index due to the falls.
In a manic day in New York, the Dow Jones dropped 7 percent, and although it fought well to recover half the losses it still closed down 3.5 percent. Traders looked on in despair as the Dow fell below 16,000 for the first time in 2-years before its miraculous recovery late in the afternoon.
The Nadaq sank 9 percent but recovered to post only a 3.4 percent loss at closing, while the S&P 500 also lost 4 percent.
Chinese markets fared no better with the Shanghai Composite suffering its worst closing for 7-years with a 9 percent loss. Trading firm CITIC Tokyo International announced it was revising its Chinese capital inflow plan at the end of the hectic day.
Almost 100 billion pounds were wiped off the FTSE before the semi-recovery, and traders in the U.S. were aware that this wasn’t going to be the usual quiet Monday on the floor even before the New York stock exchange opened and the Dow plunged a monumental 1090 points, a record point’s drop.
A sharp slowdown in China, the world’s second largest economy, has set investors on edge in recent months. The sense of panic was palpable and one floor trader mentioned that he had bitten through all his fingernails just minutes after the opening bell in New York.
Another trader said the short-term outlook seemed bleak but that it didn’t feel to him like a re-run of the 1987 crash. Deep Value chief analyst Stephen Guilfoyle said, “Tensions are high and it looks like the markets are looking down the barrel, but I remember 1987 and this is nothing like it.”
Guilfoyle’s remarks proved true as US markets stormed back late in the day to reduce the losses by nearly half.
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