New York City, New York – (StockNewsDesk) – 12/10/2014 — The U.S. markets saw a volatile trading day yesterday as economic problems lurking around China weighed on investment decisions. In addition to the Chinese economic woes, political problems in Greece surfaced which made investors sceptical about the country’s future. Moreover, the fate of the country’s inclusion in the euro zone category became doubtful in light of possible early elections. These factors carried weight, as well as the negative effects of the falling crude oil prices.
The major index in the U.S., the Dow Jones, swung as much as 200 points in volatile trading. However, the index recovered from the day’s low. This year, investors have consistently followed the rule of buy-on-dips. As soon as the crude oil prices started to recover, investors started buying stocks. The recovery was predominantly led by the oil and gas companies. Six out of ten leading oil and gas companies advanced.
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Inflation Data, New Trading Regulations Spook Investors
Asian shares plummeted as the Shanghai stock exchange was down over 5% and the Hong Kong stock exchange was down over 2.5%. Chinese lawmakers introduced a new rule in the stock trading arena which spooked investors. The new rule would limit investors from trading on margin. As per the new rule, limitations will govern the use of corporate bonds, which are commonly used as a collateral to raise short-term financing. A move of this kind will limit investors from trading on high margin. On the positive side, risk appetite of investors will decline, pushing the trade environment to a safe area.
On the economic front, new economic data reported by the Chinese government were below expectations. The Purchase Price Index (PPI) fell 2.7% compared to expectations of -2.4% and earlier periods reading of -2.2%. China’s inflation on a month-over-month basis fell into the red at 0.2% compared to an increase of 0.1%. The inflation rate is a major economic variable considering the fact that the cooling housing sector is responsible for the economy slowdown. On a year over year basis, the inflation rate came in at 1.4% compared to expectations of 1.6%.
Greece Falls by 12.8%
Fresh concerns over Greece’s political arena surfaced when the ruling Government surprised everyone by proposing a premature presidential vote. Investor sentiment dropped while the Athens stock market fell nearly 12.8%, last seen over 27 years ago. In 2012, Greece triggered a recession in Europe which might have caused the euro zone to break up. However, the euro zone came up with a plan to rescue the country. This premature presidential election puts everything at stake.
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I am a graduate in Finance, have been a stock market writer and analyst from last two years. I write for StockNewsDesk on a regular basis providing industry news.