CNN Money
– Extreme volatility rocks China stocks. The benchmark Shanghai Composite shed 4.2% at the opening bell, only to recover and close with a 0.2% loss. The smaller Shenzhen Composite followed a similar pattern, opening nearly 5% lower before rebounding to post a 2% decline. The Shanghai index has now crashed roughly 40% from its June 12 peak, wiping out all gains made this year.
Investors will now get a state-mandated break from the pain. Markets in China are due to start a four-day holiday on Thursday, as Beijing shuts down for a military parade that will commemorate the end of World War II.
– Crude oil prices dive 7%. A 7% dive to $45 a barrel comes after prices soared higher to close Monday above $49 a barrel — a nearly 30% rise in three days. Just a week ago, oil plummeted below $38 a barrel for the first time since 2009.
Concerns about a slowdown in Chinese economic growth has been one of the factors driving prices lower (…)Oil prices were also boosted by hope that OPEC may finally be willing to cut back on output in an effort to balance the market.
– Canada slips into recession as oil slump bites. The G-7 economy is a big energy exporter and the slump in crude prices — currently below $50 a barrel — has spread pain across the country and hit growth.
Official data released by Statistics Canada on Tuesday showed second quarter GDP fell by 0.5% on annualized basis. First quarter GDP contracted by 0.8%. That puts the country in a technical recession, defined as two consecutive quarters of declining GDP.
The economy is showing other cracks. Canada’s housing market is overheated and household debt continues to climb. The central bank has attempted to arrest the slowdown by cutting interest rates twice this year. Economists expect the bank to cut rates again, perhaps as soon as this month.
Bloomberg News
– China holiday. Chinese markets are now closed until Monday, much to the relief of investors rattled by the global volatility caused by the selloff in the country’s stocks. The Shanghai Composite Index ended Wednesday’s session 0.2 percent lower, having fallen as much as 4.7 percent in earlier trading. Goldman Sachs is sticking to its bullish view on Chinese equities, saying on Wednesday that valuations are attractive and improving economic data will spur a rebound.
– Oil drops. Crude dropped below $45 a barrel, with West Texas Intermediate for October delivery on the New York Mercantile Exchange trading at $44.52 a barrel at 10:25 a.m. London time. This follows Tuesday’s 7.7 percent decline in the commodity that had seen a 27 percent surge in the previous three sessions. According to John Kemp, all those violent swings in crude prices «should convince even the most die-hard believers the oil futures market is neither efficient nor rational.»
– European stocks decline. After trading higher at the open, European stocks have slipped into negative territory for a third day in a row. The fall in crude prices is hitting oil producers with a gauge of their performance dropping 1.1 percent at 10:30 a.m. London time. The Stoxx Europe 600 slid 0.4 percent.
– European bonds await Draghi. Germany’s 10-year government bond yields fell to 0.77 percent at 11.00 a.m. London time after touching a six-week high of 0.82 percent on Tuesday, ahead of tomorrow’s meeting of the governing council of the European Central Bank in Frankfurt. Continuing low inflation and volatile markets mean expectations are for an increase in rhetoric from Mario Draghi at Thursday’s post-meeting press conference. Richard McGuire, head of European rates strategy at Rabobank International in London does not expect any policy changes, but adds, «One would expect the ECB to provide some jawboning.”