Why China's Stock Markets Matter

Analysis

• Beijing will continue to intervene where possible to prop up markets and market sentiment.
• A collapse of the stock market would likely increase deposits in ordinary bank accounts.
• This would compel Beijing to rely more heavily on banks to fuel growth and pressure China to accelerate financial liberalization efforts as a way to cultivate household consumption.

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The Shanghai Composite Index fell 6 percent on July 3, rounding out a 28 percent decline since June 12, when the country's stock markets peaked. The deterioration occurred despite intensive government efforts to stabilize prices and revive investor sentiment. Overt attempts by Beijing included cutting benchmark interest rates and reserve requirement ratios and loosening restrictions on investor access to margin loans, in addition to less overt moves, such as direct interventions to prop up the market with government-backed purchases of blue chip stocks. On Friday, in a clear bid to win investor confidence in its oversight abilities, the securities regulator announced it would investigate signs of potential market manipulation. Yet so far, Beijing's efforts have failed to achieve the desired effect of stimulating, or at least stabilizing, China's leading stock markets.

NYSE resumes trading after unprecedented shutdown

The New York Stock Exchange reopened Wednesday after an unprecedented, nearly four-hour halt in trading that authorities said was caused by a major technical glitch.

Trading halted on NYSE floor(0:46)

Trading activity ground to a halt as the New York Stock Exchange suspended all trading due to technical issues. (Reuters)

The freeze in trading at one of the world’s largest exchanges was highly unusual. A U.S. official told The Washington Post that there was “no indication” that the problems were the result of a cyberattack. The person, speaking on condition of anonymity, added that the incident “seems like a technical issue.”

Creative destruction, global insurance, and the London Market Group

The global insurance industry tends to focus on the more immediate threats facing it, but its real problems are chronic and lie deep within the structure and strategies of the industry itself. The industry is engaged in what Joseph Schumpeter called “the process of creative destruction.”

Two immediate threats face the global insurance industry. A persistent low interest rate environment, fostered by central bank monetary policies, is one. More stringent capital rules issued by the Basel Committee on Banking Supervision last December are an additional problem.

The Role Of Oil Prices In Global Financial Markets

There is, to those of a somewhat romantic bent, an inherent beauty in financial markets.

Even just simple supply and demand has an appealing logic. As demand for a product increases, the price goes up, prompting an increase in supply, which in turn brings the price back down. When you look at the flow of money between countries and asset classes in a global sense, that tendency towards equilibrium becomes much more complex, but it is still the driving force of markets, with the same inherent self-correcting tendencies. Foreign exchange rates, interest rates in different countries, and stock prices around the world are all part of this complex dance, but in the modern, energy dependent world, the price of oil is arguably the most influential variable.