Global markets had another tricky start to the week. On Tuesday, the FTSE 100 lost 3%, pan-European stocks lost 2.8% and US stocks tumbled by 3%, before recovering some poise mid-week. But the volatility in the oil market put equities in the shade. By the end of Monday the price had gained 27% in three days, the best such performance since Iraq's invasion of Kuwait in 1990. But on Tuesday it slid by around 8%. News that Chinese manufacturing had hit a six-year low in August unnerved investors, while the Chinese authorities stepped up their campaign to boost domestic shares, with scant success. They paraded a financial journalist on TV, who "confessed" to stoking market panic.
What the commentators said
The volatility is more about dwindling confidence in the Chinese government's ability to steer the economy, following their cack-handed performance with the stockmarket. Almost every move made by Beijing in the past two months "has looked nuts", said Patrick Hosking in The Times. Banning large shareholders from selling, or telling state companies to hoover up stocks, made it even more obvious that the market "is being artificially propped up" and all the more likely to fall once the prop is gone.
But the last few days have taken a "sinister" turn. A TV confession announcing that 197 people had been punished for rumour-mongering about stocks laid bare "the absurdity of trying to run conventional share markets in a totalitarian state", said Hosking. "Beijing appears to have learned nothing during the past month," agreed The Guardian's Nils Pratley. There has been no mention of the real story: in the past year the government "manufactured an extraordinary bull market that was bound to collapse because valuations reached absurd levels". Meanwhile, some investors continue to worry that raising US rates could be a mistake while China might respond to more poor data with a devaluation, which would threaten to export deflation. "Get used to the wild stockmarket rides."
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Nationwide promises to protect all its branches from closures until at least 2030The building society has extended its pledge to keep all high street Nationwide and Virgin Money branches open, now until at least 2030.
-
Could dividend tax nearly double in the Budget?Self-employed directors and investors, including pensioners, who get an income from company shares would be hit if the rumoured move to hike dividend tax goes ahead.
