Economic Journal - Friday, 8/21/2015

(As of 7:20 am PST)

The global equities selloff continued Friday as more downbeat data out of China pressured markets around the world. China’s main benchmark, the Shanghai composite index, plummeted 4.3% in Friday’s session, putting the index 32% below its June 12^th peak. Concerns over global growth, led largely by the deterioration in China, increased Friday as investors digested another disappointing report from the world’s second largest economy that showed factory activity fell to a 6 ½ year low. The economic slowdown in China is pressuring markets around the world, and also throwing a wrench in the Federal Reserve’s plan to raise interest rates in September. Now, many are calling for a December rate hike, which ironically enough, has some analysts more worried than they were with the Fed’s original plan. The further the Fed pushes its rate hike, the more it would indicate the Fed is worried about global deflationary pressures. It’s a catch 22 of sorts. Regardless of when the Fed decides to pull the trigger, the uncertainty surrounding these macro events is causing all sorts of nerves and thus the volatility we’ve seen this week. European markets are looking to wrap up a dismal week that would move them into official ‘contractionary’ territory, while US markets are also facing their worst week of 2015. Safe havens like the US treasury and gold are seeing some inflows today, but other than that it looks like a risk-off scenario to wrap up an ugly week for the markets.