The China contagion: global markets

Investors are in an anxious mood after an emerging-market rout spread into developed markets last week. Momentum is a big worry: one of the best predictors of markets is how they fared the previous day, and Friday was rough. The Dow Jones Industrial Average closed more than 10% below its peak in May, as powerhouse technology stocks including Apple and Facebook slumped. Looking at the fundamentals, the panic is harder to justify. America’s recovery is continuing. Even Europe is finding its feet. China’s slowdown, now in its fourth year, is more gradual than sudden. Yet China’s markets are in the throes of an extreme sell-off. Having soared until June, they are now in negative territory for the year after falling more than 8% on Monday morning alone, rattling markets around Asia. Amid such big declines, niceties about economic fundamentals will do little to assuage the worst fears of jittery investors.

The Economist

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