At a time when, Chinese currency Yuan seems to be stabilizing in the foreign exchange (forex) market, the indications from the government about imposing a Tobin tax, a punitive levy, on forex transactions aimed at reducing trading in currency. After the unexpected devaluation of Yuan by 1.9 percent on 11 August, the Chinese currency fell further and recently started coming back into stabilization mode.At a time when, Chinese currency Yuan seems to be stabilizing in the foreign exchange (forex) market, the indications from the government about imposing a Tobin tax, a punitive levy, on forex transactions aimed at reducing trading in currency. After the unexpected devaluation of Yuan by 1.9 percent on 11 August, the Chinese currency fell further and recently started coming back into stabilization mode.
The global markets witnessed major crash in August following the China's economy slow down, Yuan devaluation, discouraging manufacturing numbers, etc, Now, the markets are recovering. But, economists, fund managers caution that the party is not over. China may slip in recession in next quarter or six quarters later.
After gaining for a while on government's intervention, offshore Yuan fell for three sessions in a row. The Chinese government seems to be moving back from supporting the weakening currency Yuan and restricting capital outflow.
Allaying fears about China's economy slowing down, Goldman Sachs says it's overblown. However, the American investment bank agreed that recently the world witnessed some negative developments.
When stock markets tumble, bonds gain momentum and vice versa. But, this time it's a different picture. Contrary to market expectations, bonds market couldn't pick up when equities across the global market dropped in August.
Several measures gauging the manufacturing industry activity are showing discouraging results. The latest manufacturing gauging index slipped below 50, which indicates the deceleration in the manufacturing industry, falling to 49.7 in August.
The US stocks turn attractive on lower PE ratios. The latest market crash might have eroded $2.1 trillion value in the market capitalization in the US stock markets, but equities are no more overpriced as price-to-earnings (PE) ratios turn attractive. According to ConvergEx, after the recent 10 percent drop in the US markets, no one can say that American stocks are expensive.
The marginal rise in Chinese currency Yuan on Monday is believed to be the extended support by the central bank of the world's second largest economy.
Even giant Goldman Sachs has been adversely affected by the stock market chaos, as its 2015 distress trading desk lost about $50 million to $60 million.
Chinese factor is impacting significantly growth plans of several economies in the Asian region. The uncertainty in the stock markets and volatility in the foreign exchange (forex) have kept the many Asian nations in a gripping situation.
One can cite several reasons for the ongoing crash of equity values across the global markets. The major reason that no one can afford to avoid is Chinese factor. The slowdown in the world's second-largest economy, China's latest devaluation of its currency Yuan, drop in manufacturing output, mining companies reporting worst performance, etc, all these developments are impacting the global markets in fact all the countries including developed and emerging economies as well.
China is reportedly planning to cut deposits that banks are required to hold in reserve to counter the effects of a weaker currency.
The recent devaluation of Chinese currency Yuan has already started creating tremors in the global markets and more precisely in the US economy as it's triggering an imbalance in international trade.
China's main Shanghai stock index finish higher Wednesday, but other stock markets were mostly lower as investors are anxious about the volatile Chinese market.
Most of the world stock markets were higher last Monday due to the steady Yuan and the expected bailout of Greece.
