Today the stock market fell with 8.2% in China, and as a result the complete World fall! 20% of everything is gone in only ONE week. Since June 40% is gone. If you had 100 cars in May, you are left with 60 cars today. The world is intimately connected to the Hang Seng index in Hong Kong, and when Hong Kong going down the world follows. This is a crisis. All earnings this year is eliminated by this last fall. The market is down 38% since June.
Remember that it is China that has maintained the relatively high prices on oil the world market. When China collapses in front of us we see the world suffer as the prices start to re-adjust. Last year a barrel of oil was about 110 US dollars, but today it is 39 US dollars (the lowest in 6 years); moving towards the predicted 30 US dollars per barrel. This is the lowest oil price since 2009. Both long term contracts and short time contracts have fallen, and that is a clear sign of an emerging GREAT disaster on the World markets –we are all going to be afflicted by this.
This is a critical week on the world markets. Most interesting considering that we do not know what happen in China and its industry. It is many insecure elements moving around in this economy today. Something we might observe on the Dow Jones index that went down with 3.1%, the ninth worst in history.
One interesting mechanism, when China goes into a stall or moves slower, are the increasing amount of oil in the world markets. With the markets in this kind of situation USA will have to increase its interests. The main country in the world economy today in China, and with a China out of balance we will find collaterals. Let us hope that this reduction in the market does not last for too long; it is not healthy or confortable to live in a bear market.
Be aware of the bubbles that exist in the Chinese market. As we have pointed out many times, the stock market are in deep problems. Partly for the over pricing of the stocks. It is estimated a 300% over pricing. Now, we also know that the industry in China is much lower than imagined before we start to understand that China also has a type of industry bubble on the top of everything. If you were scared before, you should panic today! Most of the financial world observes China with pessimistic eyes, but experts start telling us that it is even worse and that NOTHING can stop it!
Today we have three factors of major interest. How fast is the Chinese economy slowing down? Will the US Federal Reserve raise their interest rates? What is the effect of the increasingly cheap oil?
Remember this: Thousans of billions is gone! The last two weeks the world have lost 82 trillion pesos. This is a huge amount of money! This is dramatic and people suffer. Just think about it the first five minutes into the trade today the stocks have fallen with about 6%. This is one year of income lost in five minutes. In Europe alone the experts estimate a loss around 8.500 billion pesos today.
Well, some positivists think that this black Monday will recover in some weeks since markets are supposed to go up and down, but anyhow many will not sleep tonight.