Nervous breakdown: what triggered a collapse in the global stock market

On Monday, August 26, trading on the global stock market is accompanied by a drop in stock quotes. As a result of the Asian session, the Shanghai SSE Composite index fell by 1.17% (to 2863 points), Hong Kong Hang Seng - by 2.2% (to 25 602 points), and the Japanese Nikkei - by 2.17% and reached 20 261 paragraph.

Securities are getting cheaper on European markets. During the opening of trading, the German DAX index fell 0.34% (to 11 572 points), the English FTSE 100 - 0.47% (up to 7094 points), and the French CAC 40 - 0.19% (up to 5316 points) .

Quotes in Europe and Asia are falling after the collapse of the American stock market. On Friday, August 23, in the US, the Dow Jones industrial index fell 2.37% (to 25,628 points), the S&P 500 corporate index fell 2.59% (to 2847 points), and the high-tech NASDAQ lost 3% at once and fell up to 7751 points.

According to RT senior analyst at BCS Premier Sergey Suverov, panic on world exchanges was triggered by an aggravation of the US-China trade war. Earlier, the Committee on Tariffs and Fees under the State Council of China announced an increase in duties on US goods in the amount of $ 75 billion by 10% and 5%. Restrictive measures will enter into force on September 1 and December 15. The authorities of the republic explained their decision with protectionism from the United States.

In turn, the White House promised to introduce from September 1 new duties of 10% on the import of Chinese goods worth $ 300 billion. As a result, all deliveries from China to the United States may fall under restrictions. According to the Chinese side, American policy poses a threat to the principles of free trade, TASS reports.

In response to a statement by the PRC authorities, Donald Trump announced an increase in existing duties from 25% to 30% on imports of Chinese goods worth $ 250 billion. Moreover, from September 1, the new tariff on products from China with a volume of $ 300 billion will not be 10%, but 15% . The American president wrote about this on Twitter. In his message, he also called on American companies to return production from China to the United States.

It is noteworthy that, according to Trump, amid the announced restrictions, Washington is still ready to conduct trade negotiations with Beijing. Meanwhile, according to Sergei Suverov, investors are less and less likely to believe in resolving the conflict and warming relations between the two countries in the near future.

“It seems to us that the trust between Washington and Beijing is seriously undermined, and this may continue to destabilize world markets,” Suverov explained.

Schism in the Fed

The reason for the discontent of the participants in the global stock market was the statement by the head of the US Federal Reserve Jerome Powell. On August 23, during a speech at a symposium in Jackson Hole (Wyoming), the Fed chairman again did not give investors a clear signal about the regulator's future monetary policy. As the director of financial markets and macroeconomics analysis at Inst Invest Invest Alexander Timofeev explained in an interview with RT, the players expected to get a hint from the Powell about another interest rate cut, but were disappointed.

Note that on July 31, the American analogue of the central bank lowered its interest rate for the first time in almost 11 years. In the long run, this measure supports economic growth, but makes investments in dollars less profitable. Markets praised the likelihood of such a decision and waited for the Fed to announce the beginning of a long-term policy to reduce rates. Powell refrained from specific statements.

Investors consider it necessary to reduce interest rates amid forecasts of an imminent recession in the United States. According to the Federal Reserve Bank of New York, the probability of an economic downturn in the United States during the year is 31.4% - the maximum value for 10 years. At the same time, as noted by Alexander Timofeev, the Fed Committee on Open Market Operations (FOMC) does not yet have a definite position on measures to support the economy.

“Powell at Jackson Hole refrained from clear hints of further easing of policy and limited himself to neutral statements. By the way, the FOMC committee is increasingly showing a split. On the eve of the meeting, two members of the committee stated that there was no need for economic incentives, and spoke in favor of the wait and see attitude of the regulator, ”the expert noted.

The lack of clear statements following the Jackson Hole symposium may also be due to the traditional closeness of the meeting. This was in an interview with RT told the head of the Russian Economic Society. Sharapova Valentin Katasonov. According to him, annually participants in the symposium are heads of central banks from around the world. Moreover, at the moment, regulators are preparing for a massive reduction in interest rates in the framework of currency wars and so far do not want to publicize their plans.

“Most likely, a certain general policy, coordination is being developed today. “The European Central Bank and the Federal Reserve System have embarked on easing policies, and I think that they will try to attract other central banks to their course,” Katasonov explained.

Against the trend

It is curious that against the backdrop of a global fall in stock quotes, the Russian financial market remains relatively stable. During the auction on August 26, the Mosbirzhi index grew by 0.3% to 2669 points. At the same time, the dollar gained about 0.05% and traded near 66 rubles, while the euro fell by 0.2% to 73.9 rubles.

The official exchange rate of the Central Bank on August 27 was 65.97 rubles per dollar and 73.39 rubles per euro.

As Katya Frenkel, head of the analytical department at Finist, explained in an interview with RT, lately, Russian market players are less and less exposed to global exchange panic. According to her, investors are more focused on changing oil prices and the sanctions agenda.

At the auction on Monday, the cost of energy Brent benchmark brand rose by 0.5% - up to $ 59 per barrel. Such data are provided by the ICE exchange in London. As Frenkel notes, oil appreciation supports the national currency.

In addition, on August 26, the States introduced a second package of measures against Russia in the Skripals case. As part of the restrictions, Washington will oppose the provision of loans, financial or technical assistance to Moscow by international financial institutions such as the International Monetary Fund and the World Bank. In addition, US banks will be prohibited from participating in the primary market for non-ruble bonds of Russian sovereign debt and providing non-ruble loans to the Russian government.

However, market players have already taken into account new restrictions in their actions, so experts do not expect sharp fluctuations in the ruble exchange rate. Moreover, sanctions apply only to the purchase of Russian Eurobonds - debt securities denominated in foreign currency. While the main instrument of the financial authorities of Russia to raise funds from abroad remains the ruble bonds of the federal loan (OFZ).

“The second package in the Skripals case turned out to be extremely formal, essentially meaningless - Russia has not occupied the IMF or the EBRD for a long time, it hardly needs to place Eurobonds, gaining the bulk of the debt in rubles, and American banks do not need us to place these loans,” - explained RT Chief Analyst at TeleTrade Group Peter Pushkaryov.

According to the forecast of Sergei Suverov, in the near future the dollar exchange rate may drop to 66.5 rubles, and the Mosbirzhi index will remain close to current values. In turn, Katya Frenkel believes that in September the Russian currency still has chances to strengthen to 64.5–65 rubles per dollar.