China stocks slump, European equities hitting highs

Volatility in the markets continues into this week as Chinese equities plummeted in its largest decline since 2008, after regulators reigned in speculative traders.

 

The Shanghai Composite Index sank around 7.7 per cent on the news that the loaning of money to new equity traders was suspended, which has many worrying that China’s golden age of margin financing is over. This decline comes on the heels of a 10-week long winning streak for the index, which was the longest run of gains since May 2007.

 

Declines were also seen in Hong Kong, where the Hang Seng fell around 1.5 per cent and an index of mainland China shares that are traded in Hong Kong fell around five per cent.

 

However, European shares are chalking up record highs as investors focus on the much anticipated start of the European Central Bank’s bond-buying programme at the next policy meeting, on Thursday.

 

Germany’s DAX climbed near one per cent to hit its highest level in history, while others such as the FTSEurofirst 300 reached seven-year highs.

 

Swiss stocks recovered from last week’s rout, however, markets are still digesting the Swiss National Bank’s shock announcement to end the coupling of its franc to the euro. Currency markets are still a little jittery as traders continue to reposition themselves. The loss of UK currency broker, Alpari, will likely be serving as a warning to investors.

 

The huge volatility that was the result of the bank’s decision saw millions lost by traders and also saw the closure of Global Brokers NZ, as well as Alpari. However, while other forex companies such as IG Index and CMC Markets recorded losses (IG Index suffered a loss of £30 million), they are still operating business as usual.

 

The US markets are closed for Martin Luther King day, which will likely make for thin trading conditions in the afternoon.

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