Whoa, slow down. I still hear Jim Cramer yelling and feel vague pangs of doom. What the hell is happening?
A lot! Stock markets have been in tumult all around the world since last week. But Monday was especially violent—think barrels tumbling off Niagara falls. It was bad inChina, in London, in Japan. Here in the States, the S&P 500 dove about 4 percent, with the Dow and the Nasdaq taking similar spills. Over the last five days, the benchmark S&P index has lost more than 200 points, or about 9.7 percent, putting it on track for the worst August in 17 years.
So far on Tuesday, shares in Shanghai closed down another 7.6 percent. They’ve now toppled more than 15 percent over the last two days alone. This, despite the fact that China’s central bank injected 150 billion yuan (about $23.4 billion) into the financial system. Analysts have started describing that market with adjectives like “self-imploding.” Exciting stuff!
Donald Trump says this is all China’s fault. Is it China’s fault?
Kind of, though it’d be a gross oversimplification to pin this all on China. But financial, economic, and monetary worries in the Middle Kingdom are definitely spooking U.S. investors.
So what exactly did China do?
The shortish version is that this all started two weeks ago when China decided todevalue its currency. For two straight days, China’s central bank allowed the yuan to fall by nearly 2 percent, then keep edging down. This caught a lot of people off-guard. China has kept a tight grip on its currency exchange rate for 20-some years. Since March, the yuan hadn’t moved more than 0.3 percent in a single day. For it to suddenly plunge 4.4 percent in a matter of days sent shivers through the global markets
Read more at INC.