Firstly I like to say a big thank you to all my blog followers this week for the great response I had this week by reading my blog and sharing my posts with others. Without you this blog wouldn't be possible. Let's get straight into business;
The week started off to a shaky start on Monday following a sharp selloff on US equities last week Friday which added fuel to the fire when Asia opened on Monday. Indices sold off quick as many had expect the PBOC (People's Bank of China) to announce stimulus measures to support its economy. The unexpected expectation highlights markets participants craving need for rates to stay lower for longer.
As a result of such a vicious selloff in the Asian session the contagion spread to US markets fast and everyone's eyes were glued on the futures to indicate what open the US were looking at. At one stage futures on the Dow, S&P 500 & NASDAQ were down over 4% in pre-market open. Finally when markets did open circuit breakers were hit and the market froze for a moment to catch it's breath. It was pandemonium as everyone scrambled to hurry into cash.
But that wasn't the end of it as Tuesday's action was worrisome. The Shanghai Composite Index had ended down 7.5% while other Asian markets managed to find a green footing which followed into the US up until the last hour of trade where being up over 3% and set for a bounce confirmation suddenly fell into negative territory by over 1% . Terror definitely reined this week.
Needless to say most markets had managed to get to grip with the realities on the ground and bounced back. For some a roller coaster ride of emotions others complete despair, the characteristics that aren't always felt with bullish sentiment. The PBOC eventually made the all but too late announcement of measures to be implemented by not only dropping the RRR (Reserve Rate Requirement) but also slashing the Lending Rate. It was also said that the so called Plunge Protection Squad, a team formed to prevent Chinese equities sinking into the abyss, were going to stop intervening until authorities had fully debated the consequences of intervention. Although this was said there was little doubt as to why there appeared to be a sudden surge in Chinese equities come late session for the days proceeding the announcement.
In other news Facebook released a statement saying that 1 billion users had logged into the social media platform on Monday setting a new record for the company which now boasts that 1 in 7 people use Facebook on a daily basis. The world is becoming more closer to one another with the use of technologies in it's ever demand on the march towards progression.
Venezuela made a pleading call to Saudi Arabia to call an emergency meeting of OPEC members because the country is hemorrhaging from the effects of lower oil prices. Saudi Arabia heads up OPEC as the leader and made a stern call that it will not be dropping production in their country as they themselves battle to stem government spending from the result of the same symptoms being felt by Venezuela. This is not the first call made by an OPEC member with Nigerian Oil minister calling for it a few months back. The planned meeting will take place in December this year as things stand. What's certain is that political tensions are rising as these oil rich countries continue to sacrifice citizens well-beings for oil domination.
Related to the story is a further requests to OPEC to allow Russia to join talks at that meeting should it happen. Russia, a nation who has borne the brunt of sanctions from the West is reeling as its economy shrinkage, currency devaluation and drop in government revenue plummet has placed its leader Vladimir Putin in a compromising position. It was also said that German Chancellor Angela Merkel and French President Francois Hollande intended to hold a telephone conversation with Mr Putin to lay out a plan to get back to the negotiating table so sanctions can be dropped.
Finally it's all eyes on Jackson Hole where the Fed is hosting its annual symposium where central bankers from around the globe are invited to attend and the Fed expresses it's policy intention over the next year. The big question on everyone's mind is when will the Fed being hiking rates and at what pace? Given the turbulent nature of things at the moment I think it's safe to assume that a September hike is off the cards but we should remain cognisant that rates will go up. As I've heard in days past some calling for QE4 (Quantitative Easing) to be used again, I can't find reasoning to agree with this.
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