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Posted by on Aug 23, 2015 in Health & Wealth, Highlighted Features |

World stock markets decline on economic concerns

World stock markets decline on economic concerns

Global equity markets fell sharply this week as result of global economic concerns, continued weakness in emerging markets, volatility in China's stock market, and further declines in commodities prices.

Canada's S&P/TSX Composite fell sharply to end the week at an eighteen month low. A broad decline in financial and energy stocks reflected a steep drop in U.S. crude prices which ended the week just above $40 a barrel. The materials sector was little changed as support from rising gold prices helped offset worries about base metals.

Commodities continue to be hampered by weakening demand and by concerns about economic growth in China and the rest of the world. Severe volatility in China's stock market contributed to an 11.5% loss for the Shanghai Composite index. Disappointing manufacturing data intensified worries about China's economy and slow global growth. The focus on China's economy has intensified since the country's surprise devaluation of its currency. Wall Street's S&P 500 also retreated. Concerns about when the Federal Reserve will raise interest rates, developments in China, commodities worries and the continuation of tepid second-quarter earnings put pressure on share prices. As the earnings season winds down, data points to a decrease in corporate profits over the quarter.

The timing of the next U.S. interest rate increase remains uncertain although expectations of an increase in September 2015 declined as volatility in financial markets increased. Minutes of the Federal Reserve's most recent policy setting meeting showed that while a September rate hike remains possible, many Fed officials are cautious about a rate increase this year.

European markets lost ground on global economic concerns. While Greece worries dissipated as Germany's parliament approved the latest Greek bailout deal, the country faces continued uncertainty as the prime minister resigned to enable a snap election. Asian markets reacted negatively to the latest China developments. Many other emerging markets saw steep losses on commodities and currency concerns.

In other news this week:

  • Japan's recovery stalled in the second quarter as the economy contracted by an annual rate of 1.6%.
  • Canadian inflation rose to 1.3% y-o-y in July, the highest since December, led by food prices.
  • Canadian retail sales increased by a more-than-expected 0.6% in June.
  • U.S. existing home sales rose in July to their highest point since 2007.
 

 

What's ahead next week:

Canada

  • No major economic data releases.

U.S.

  • GDP second quarter, second estimate.
  • Annual Jackson Hole economic policy symposium.
  • House prices, sales.
  • International trade data.
  • Durable goods orders.
  • Personal income and consumption.
Click here to see this week's market closing values

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