Global News August 20, 2015

  1. Bloomberg News
  2. Global News August 20, 2015

CNN Money

UK stocks have fallen 10% since April. Britain’s FTSE 100 benchmark stock index fell to a new seven-month low on Thursday, taking it more than 10% below its record high in April. That means the U.K. blue chip index has technically entered a correction.

British markets have been hard hit by the market turmoil in China and the oil crash. That’s because the London index is heavily weighted towards mining and resource companies, which have been hit by the slowdown in commodities demand.

The FTSE 100 has now lost nearly 3% so far in 2015. The international nature of the companies in the index means its performance is not always an accurate reflection of the British economy. Indeed, UK GDP is still expected to grow by about 2.6% this year.

This country’s pension fund just lost nearly $9 billion. Norway’s pension fund, the world’s largest sovereign fund, lost 73 billion kroner ($8.8 billion) in the second quarter. The 0.9% decline — its first losses in three years — came because of low interest rates, weak bond markets and falling returns on U.S. stocks.

Norway puts most of its oil revenues into the fund to raise money for pensions and other government expenses. Low interest rates have also hit the fund’s returns on sovereign bonds. The fund said negative returns on its U.S. investment contributed to the overall downturn. It lost 3.4% on its $55 billion investment in U.S. treasuries and 1.4% on its U.S. stock holdings.

The fund was also hit by the slowdown in China: Its investments in mining companies suffered because of lower demand from China. Its investment in real estate gained 2%. The fund has posted 5.8% annual return between 1998 to 2014, the Norwegians said.

Bloomberg News

– The world reacts to the Fed. The fallout from the minutes of the Federal Reserve’s July meeting continued to reverberate through global markets. Global stocks and the dollar dropped, Treasuries, gilts and bunds rose, and gold advanced to a one-month high. While conditions for a hike were approaching, policy makers said they’re concerned about stubbornly low inflation. Adding to worries is that the Fed had already met before China’s yuan devaluation on Aug. 11. Market watchers now aren’t as confident that the Fed will hike rates in September — the odds went from about 50-50 last week to 38 percent.

– China slumps. Chinese stocks fell to a two-week low. The prospect of more state support was no match for bearishness about the slowing economy and concern a weaker currency will spur capital outflows. The central bank injected the most funds in open-market operations since February as intervention to prop up the yuan strained the supply of cash.

Speculation around the government’s intentions has escalated since China’s securities regulator signaled authorities will pare back a campaign to prop up share prices. The state’s role in supporting the market has taken on greater importance as China’s wealthiest traders join an exodus of foreign investors in the stock crash.

– Kazakhstan sparks domino fears. First China, then Vietnam, now Kazakhstan’s move to float its exchange rate is the latest sign emerging nations will stop defending their currencies in a race to grab more export revenue. The Kazakh tenge plunged a record 23 percent while a gauge of developing-nation currencies slid to a record low. The selloff in emerging markets is showing no sign of letting up — the commodity rout and China’s surprise devaluation of the yuan last week are highlighting the risks in those markets.

– U.K. retail sales miss. U.K. retail sales increased less than economists forecast in July, sending the pound down for a second day against the euro. The slowing momentum in consumer spending bolstered speculation that the Bank of England may delay raising interest rates. Meanwhile, the FTSE 100 Index is heading for a correction from a high reached in April, in part because of the commodity rout’s effect on mining and energy stocks.