On both sides of the Atlantic, shares are being shed, markets are in meltdown and the biggest companies are in a panic. According to Angela Monaghan, here are the major reasons why.
1 The Ebola disaster
Thousands of West Africans have already lost their lives to the deadly virus and now it seems that efforts to prevent Ebola from spreading further afield have failed. Last week, a Spanish healthcare worker that treated an Ebola patient was revealed to have contracted the virus, after her symptoms were misdiagnosed three times by doctors. In the US, it has been confirmed that the nurse that treated the country’s first Ebola casualty has also been infected – after she flew halfway across the country from Cleveland, Ohio to Dallas, Texas. Fears of an outbreak are mounting and, inevitably, are interfering with business as usual.
2 Another Eurozone crisis
Inflation in the single currency market is down to just 0.3%, fuelling fears that a deflationary spiral could be on the cards.
3 Germany heading for recession
Europe’s most robust economy is floundering. In the second quarter of this year, the economy contracted by 0.2% and is likely to continue shrinking. Manufacturing and exports are both slowing, worsening the prospects for the Eurozone.
4 US-led global slowdown
Investors have justifiably panicked over sharp manufacturing and retail slowdowns in the US, falling oil prices and weak economic growth. Since most of the world’s economies are tied up with the performance of the dollar, this is very worrying indeed.
5 Geopolitical tension
Hostilities persist between Russia and Ukraine, perpetuating sanctions and damaging global trade. China’s handling of pro-democracy protesters in Hong Kong is making investors in the financial hub jittery, while escalating US and European involvement in the fight against ISIS is creating further uncertainty in the markets.
No one wants to be caught out by the next Lehman Brothers-style failure. Unstable markets mean that many are looking around for signs of the next institutional failure, which may be making things worse.
7 It’s just that time of year
October is a notoriously bad month. It was the month of the 1929 Wall Street Crash and Black Monday in 1987. It was the month that panic hit in 1907, limiting access to credit.
There isn’t, really, any logical reason why markets should hate October as much as they do, especially given that some of the autumnal disasters of the past were actually a delayed reaction to September crises – and, in fact, more bear markets have ended than have emerged during Octobers. However, negative associations mean that dips during this month can have a near-superstitious hold on investors, intensifying negative trends. It’s called “The October Effect.”
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