The past week was the worst first week of the year in the history of Wall Street, with Dow Jones, Nasdaq and S&P all recording losses at the close of trading on Friday. This was the week with the greatest losses since 31st August 2015, with Dow Jones losing 6,2% in the week, Nasdaq 7,3% and S&P 6%, while only two out of the 30 stocks that make up the Dow Jones recorded increases.
The US markets tried to resist the oil pressures, supported by the positive employment data announced on Friday, which are paving the way for a further increase in US interest rates, but resistance efforts failed since the “Chinese fever” that overwhelmed markets during the whole week took its toll once again.
Analysts believe that the increase of uncertainty abroad may well hinder the growth of the US economy in the coming months, however the American economy actually managed to complete 2015 by recording an impressive increase in employment levels.
In the meantime, as already reported, the Chinese authorities are continuing their moves in order to give markets some breathing space, attempting to appease the concerns of investors following the sell offs. The suspension of the circuit breaker mechanism was implemented and a more constant average price for the exchange of the yuan has been set.
Moreover, the Chinese Central Bank announced that it will further liberate the interest rates. This move aims at exerting more pressure on the interest rate margin of the Chinese banks, something which is a key factor for their profitability, since it is expected to lead to an increase in the deposits. Finally, the Chinese Central Bank also announced that it will retain its flexible monetary police and will provide adequate liquidity for the Chinese banking system.
Many feel that such concerted moves will soon bring calm to the markets, while most experts advise investors and traders not to panic and to keep their calm, positions and composure. It remains to be seen whether the frenzy of last week was short-lived or whether it will linger and upset markets further.