Translation from English

Monday, August 24, 2015

Los Angeles Times- Breaking News- Stock Market Rebounds After Huge Losses This Morning


BUSINESS 

Dow recovers dramatically from opening dive of more than 1,000 points

The U.S. stock market had a wild Monday morning in response to another sell-off in China and other major countries, with the Dow Jones industrial average first plunging more than 1,000 points before surging back to trim its losses.
The blue-chip industrials were off about 115 points, or 0.7%, at 16,350 after skidding as much as 1,089 points moments after the opening bell.
Nonetheless, the average has dropped nearly 7% in the last week and nearly 11% from its record high of 18,312.39 set on May 19.
Other key U.S. indexes also tumbled Monday into so-called correction territory — a decline of 10% or more — over the three days.
The benchmark Standard & Poor’s 500 index was down about 19 points, or 1%, in midday to about 1,950.
The Nasdaq composite index also was off about 19 points, or 0.4%, in midday to about 4,680.
Chris Hardt, a financial advisor at Edward Jones, has been telling clients that Monday morning’s pullback is not unusual.
“The market will pull back 10% about once a year on average,” he said. “This is a normal thing.”
Long term, the market still looks strong, said Michael Kanigher, a UBS managing director and private wealth advisor in Los Angeles.
“We’re in a volatile market, and these pullbacks are going to occur for reasons,” he said. “The reason today is China. Before, you could insert Greece and talk about the same problems. Right now, the market seems to be doing well, and definitely not on a path to a recession.”
The Dow's worst point drop for a full day was 777.68 points on Sept. 29, 2008, which amounted to a 6.98% drop. The average’s worst percentage decline for a full session was 22.6% on Oct. 19, 1987.
Among the market’s leading stocks, Apple Inc. fell 5.6% to $99.88 a share before recovering with a 1.7% gain in midday trading; and General Electric Co. was down 4.9% at $23.39 before cutting its loss to about 40 cents, or 1.7%. Netflix Inc. plummeted 10.8% to $93.15 a share, before reversing the trend to gain 3.6% to about $107.50.
Traders looking for a safer haven bid up Treasury bond prices, sending their yields sharply lower. The yield on the 10-year Treasury bond fell below 2% for the first time since April, to 1.96%.
U.S. and foreign stocks again followed a massive sell-off in China amid growing fears about China's slowing economy and the ripple effect it could have on corporations worldwide that do business with China.
China's benchmark indicator, the Shanghai composite index, tumbled 8.5% on Monday, triggering the global sell-off. The Nikkei index in Japan skidded 4.6%, as did the Stoxx Europe 50 index in Europe. Major indexes also fell in Germany and Taiwan.
Even with its loss this year, the Shanghai index remains 43% higher than it was a year ago.
The sell-off occurred despite an announcement by China’s Cabinet on Sunday that authorities would allow pension funds managed by local governments to invest in the market, potentially providing a boost worth hundreds of billions of dollars.
Chinese state media reported on Monday’s losses without commenting on government plans or policy -- Xinhua, the state news service, ran a four-line story on the plunge, focusing on markets beyond the country’s borders.
"Today's stock market drops worldwide afford further evidence that the past decade has been China's 'Roaring '20s' -- and that the chickens are now coming home to roost," said Cornell Law School professor Robert Hockett, an expert in financial and monetary law.
"China's emerging middle class has taken on huge quantities of private debt in recent years to buy everything from real estate to stocks," he said. "The result has been a sequence of classic credit-fueled asset price bubbles much like those experienced by the U.S. in the 1920s and early 2000s.
"Now that asset prices have leveled off and reversed, millions of Chinese are faced with the prospect of owing more on their debts than their assets are worth -- just like U.S. investors and homeowners before them."
Users of Sina Weibo, the country’s most popular microblog, voiced concerns that the rout would precipitate a global recession, similar to the 2008 financial crisis. “Is a global recession really coming?” wrote one user, Lilyyuncai. “Why shouldn’t the government adopt some measures to deal with this?”
Analysts said the Chinese government’s heavy-handed response to midsummer turmoil in the country’s stock markets, followed by a surprise currency devaluation on Aug. 11, have shaken investor confidence in the ability of the country’s economic policymakers to mitigate a further downturn.
Any protracted slowdown in China would have ripple effects around the world; global stocks have fallen by more than $5 trillion since mid-August, when the currency devaluation was announced.
“This is very much the delayed hangover of the bursting bubble,” said Fraser Howie, coauthor of “Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise."
“Back seven weeks ago during the government intervention, when [the government] bought billions of dollars of shares, the market thought that it would get support to encourage buying. Now, there’s some clarity that the government isn’t always going to be there.”
Twitter: @peltzlatimes
Times staff writers Jonathan Kaiman in Beijing and Samantha Masunaga in Los Angeles contributed to this report.
MORE ON STOCK MARKETS:
Copyright © 2015, Los Angeles Times

UPDATES

9:45 a.m.: This post was updated with the latest figures from U.S. markets and with information from analysts.
8:58 a.m.: This post was updated with the latest figures from U.S. markets and information on China's markets.
7:54 a.m.: This post was updated with the latest figures from U.S. markets.
7:16 a.m.: This post was updated throughout with new details.
6:42 a.m.: This post was updated with figures from the opening of U.S. stock market.
This post was originally published at 5:44 a.m.
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