Tuesday, August 25, 2015

Investors Seek Answers Amid Stock Market Rout

You think?

Maybe they needed some faster circuit breakers, or something.

At the Wall Street Journal, "Investors Grasp for Answers Amid Wild Stock Rout":
Concerns about China’s economy intensified, accelerating the selloff across global markets as investors tried to assess whether the rout was just a short-term pullback or a signal of deeper trouble.

The market misery marched from China though Europe to the U.S., where the Dow Jones Industrial Average fell 1,089 points Monday morning—the worst intraday drop in its history—then popped back up like a cork and fell again in a jagged line to finish 588.40 points down, extending a slide that has left the blue-chip index off 11% this year.

European and Asian shares suffered even deeper declines, with the Shanghai Composite Index tumbling 8.5%, entering negative territory for 2015, having risen as much as 60% at its peak in June.

“Meltdown was the only word that can be used to describe price action in equities,” said ANZ Bank Senior Economist Mark Smith.

Asian stocks continued to be volatile early Tuesday in China, though markets elsewhere in the region showed signs of tempering. China’s Shanghai Composite opened 6.4% lower.

On Monday, oil slid below $39 a barrel in New York, and emerging-market currencies like Turkey’s lira and Russia’s ruble fell against the dollar.

The euro and U.S. Treasurys were notable exceptions, gaining in value as investors sought out safer havens for their money.

Richard Madigan, chief investment officer of J.P. Morgan Chase & Co.’s private bank, called an emergency investment committee meeting following the morning drop in U.S. stocks. The executives spent more than an hour discussing what they were seeing and what had changed.

“Some of this is knowing what you don’t know,” Mr. Madigan said. “And not trying to overthink what we’re seeing but just try to understand what is real, fundamental and deserved…what may create opportunities.”

The severity of the selloff in stocks—shares of J.P. Morgan were down more than 20% at one point early Monday—confounded some observers, because the U.S. economy is showing few of the red flags that preceded major market downturns in the past. The economy continues to expand, corporate earnings outside the energy sector are staying aloft, and credit remains widely available at historically low interest rates even for some junk-rated companies.

Still, the risk is that the market turmoil could spill over into the U.S. economy if the selloff persists. The wide-ranging declines are already raising concerns for officials around the world, notably the Federal Reserve, where officials are debating whether to raise interest rates this year. Beyond that, the rise in the euro and turbulence in emerging markets are threatening the already shaky growth in Europe’s export-driven economies.

Meanwhile, China is pursuing new measures to boost lending and economic growth. The sharp drop in the Shanghai Composite, its worst single-day percentage decline in more than eight years, rippled across Asia, with Japan’s Nikkei Stock Average dropping 4.6% and Australia’s S&P/ASX 200 index falling 4.1%...