(As of 7:25 am PST)
US
stocks are in recovery mode early Tuesday after suffering one of the worst
single trading days in four years yesterday. Fears over China’s stock market
collapse and weakening future growth outlook sent the global equity markets
into a tailspin yesterday with the Dow closing down 588 points (-3.6%), while
the S&P500 and Nasdaq closed down -3.9% and -3.8% respectively. Today’s
recovery is a result of central bank intervention in China, which came after
the Chinese markets closed Tuesday. After another sharp sell-off in Shanghai,
the People’s Bank of China announced Tuesday that it would cut its key benchmark
interest rate while lowering its reserve requirement, effectively injecting
over $100 billion into the Chinese economy. The accommodative policy measure
came after the Asian close, too late to effect trading in Chinese markets, but
is supporting the rally we’re seeing in Europe and the US today. Positive
economic data including a stellar reading of consumer confidence in the US is
also aiding today’s rally. Gold is down today losing some of its ‘safe-haven’
appeal while oil prices are up but remain below $40 per barrel. It’s too early
to tell if today’s turnaround will last or if we’re simply seeing a ‘dead cat bounce’
on overselling yesterday.
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