Nikkei Drops 7 Percent After China PMI and Feds Comments

Share markets fell sharply on Thursday as investors piled back into safer assets, unnerved by the twin setbacks of unexpected weakness in China’s economy and signals that the U.S. central bank may soon scale back its stimulus program.

The yen bounced sharply off recent lows and German Bunds rose, gaining support from a shift in sentiment that followed Fed Chairman Ben Bernanke’s comment that the bank may trim its bond purchases at one of its next policy meetings.

A surprise drop in Chinese factory activity in May, followed by data pointing to a second quarter economic contraction in the euro zone, added to investors’ worries.

The revived concerns about global growth sent Oil and copper prices lower, and MSCI’s world equity index .MIWD00000PUS fell 1.2 percent, putting it on course for its worst day of the month.

Japan’s main Nikkei share index earlier plunged 7.3 percent, its biggest one-day percentage drop in two years and calling a halt to a rally driven by aggressive stimulus measures that the Bank of Japan unveiled in April.

via Reuters

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza