14 October 2018

What Triggered the latest Global Market Sell-Off ???

It was not a good day to starts with on 10 Oct 2018, where US stocks suffered their worst fall since early February. The turbulence in US stock markets triggered another sell-off in Asia the following day, with the MSCI Asia ex-Japan falling to a 19-month low.

The sell-off hit broader equity markets in Asia – bourses in Taiwan, South Korea, and China registered deep losses. Of course, Malaysia could not shield itself from this slump either.

Why Global Market Sell-Off ???
  • Rising bond yields
    The highlight here is on the yield of 10-year US Treasuries, which have surged from 2.8% at the end of August to as high as 3.2% earlier this week. The higher bond yield was said to have a knock-on effect on the so-called “real economy” because it was the benchmark of interest rate in the US. Higher financing costs may prevail due to this.

  • Global economy slowdown
    Then, thanks to the International Monetary Fund (IMF) which painted a gloomy outlook for the world's GDP growth at 3.7%, down from its April estimate of 3.9%.

  • Escalating US-China trade war
    Not a news anymore, but the fighting between the two of the world largest economy would only derail the world's growth. No one will win either.

  • Spiking crude oil prices
    When crude oil prices rally to above US$70/bbl currently, it stokes up the inflation fears among central bankers to raise the interest rate to contain it. Raising interest rate is not a big deal, but hiking it too fast over a short period of time doesn't bode well to the economy.

Some of the WORST crashes happened in the month of September & October:
  • Sept, 1869 – Within minutes, the inflated gold prices plummeted 20% from $160 to $133, dragging down the stock market altogether with it. 

  • Sept, 1873 – The starts of the "Panic of 1873" that triggered the first 'Great Depression' in the United States and abroad.

  • Oct, 1907 – A bust in the speculative run of copper affected banks in the US, leading to the stock market dropping 50%.

  • Oct, 1929 – Known as The Wall Street Crash in US

  • Oct, 1987 – Dow Jones fell 22.6%, the worst daily loss in its history, labeled as Black Monday

  • Oct, 1997 – Dow Jones crashed caused by the Asian or Tom Yum Goong crisis.

  • Oct, 2002 – The month when NASDAQ hit the bottom from the famous ‘dotcom’ bubble burst in 2000, and from Sept 11, 2001 attacks on the world trade center twin towers

  • Sept, 2008 – Collapsed of the big brother - Lehman Brothers, then the collapsed of world markets as a result

  • Oct, 2018 - ???

We still have another 2.5 weeks to go before ending this concerning October. Would it be another crash of the history? Let's wait and see...

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