Chinese stock markets plunged overnight after being rocked by another wave of selling pressure that saw the Shanghai market fall 8.5% while the Hang Seng fell 6.1% and the Hong King China H shares fall 6.5%. Another round of actions from the government to try and stabilize the markets which included allowing the state pension fund to buy stocks, threats to punish big shareholders dumping more than their limits of stocks, and talk of another cut to bank reserve requirements did nothing to stop the meltdown. Continued declines show once again that market crashes take on a life of their own and until they are completely washed out, governments can only postpone investors and trader actions, not stop them. The China crash has pulled other stock markets around the world lower too. The Nikkei has fallen nearly 5% on a combination of China weakness and the impact of the soaring JPY on stocks, while the S&P/ASX fell about 2.4%. European and US indices plunged early on but since then have tried to staibilize trimming what had been 3% plus losses for many major markets bake into the 1.5%-2.5% range. Major round numbers like 10,000 on the Dax and 2,000 on the S&P turned out to be nothing more than speed bumps with 10,000 on the IBEX the latest to go by the wayside. Growing fears falling Chinese stock markets could destabilize its economy and impact resource demand continues to rock commodity markets with crude oil down 3.5% and copper down 2.5%. Resource sensitive stock markets in Australia (down 2.5%) and Norway (down 5.0%) and resource currencies, particularly AUD and NZD have been under pressure to start the week. This suggests Canadian stocks and CAD may also come under pressure this morning. In currency markets, EUR continues to rebound, gaining another 1% on USD today and pulling continental currencies higher. Even NOK and SEK have been able to outperform other majors today, particularly their resource peers. The steep declines of the last week had left a number of stock markets oversold by late Friday and its possible today’s early selloff could be the washout before a trading bounce. That being said, the weakest seasonal period of the year for stocks which runs from mid-August through mid-October is just starting so we could see quite a bit of volatility in both directions that could create intraday and swing trading opportunities for some time. Gold has started to emerge as a significant indicator of market moves. Last week, as the stock selloff accelerated, gold took off as traders moved cash back into traditional havens for capital which also includes JPY and CHF. Today, however, gold did not continue to rally while stocks fell early, on, a sign that the limits may have been reached for now. Gold may also remain active in the coming weeks and months, particularly as we move into a historically favourable seasonal period for gold with Indian Wedding Season approaching. Corporate News There have been no major corporate announcements overnight Economic News Significant announcements released overnight include: There have been no major economic announcements overnight Upcoming significant announcements include: 8:30 am EDT US Chicago Fed previous 0.08
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