Global Market Indicators 22-26 Feb 2016

For the first two months of 2016, international stock markets have experienced an overall decline, especially in China where both the Shanghai and Shenzhen foreign markets struggled with a 20% decline.

The initial figures for the country were released at the beginning of this year which still brought concern and indicated a downturn in the world's economy. In particular the numbers concern the expected growth, exports and purchasing managers index (PMI).

China announced growth of 6.8% year-on-year in the 4th quarter and 6.9% for the entire year of 2015. However, this was slightly lower than the government’s projections of 7% and expected growth rates of 7.3% (this was the lowest growth rate in the past 25 years). In January, members of China's National Development and Reform Commission estimated a business growth rate of 6.5%-7% PMI (official manufacturing PMI) which was an all-time low for the past 3 and a half years at 49.4 and a decline of 11.2% in exports in the same month.

Japan also saw a slight economic contraction in the final trimester with a rate of 1.4% per year and a -12.9% for exports in January, the greatest decrease since 2009. Figures for Japanese exports had dropped for 4 consecutive months partially due to drops in oil and metal prices. As for levels of Japanese exports to neighboring Asian countries, the number dropped by 17.8% in January.

In the Eurozone, figures for the purchasing mass index (PMI) dropped from 54.3 in December 2015 to 53.6 in January 2016. Prompting Germany to reduce its projected growth rates from 1.8% to 1.7% due to serious concerns over the growth of emerging markets that could potentially affect the country's exports. There were also concerns over defaults made by Deutsche Bank. Some good news managed to surface, including S&P revising Greece's credit rating from CCC+ to B- due to the success of increasing the budget and reforming the bank's structure.

The US officially announced an increase in its GDP by 0.7% for the fourth trimester down from the 2% recorded in the third trimester. Due to world's volatile economy, dwindling prices of commodities and a sense of uncertainty that seems to be on the rise. Ms. Janet Yellen, Federal Reserve System (FED) president announced that there would possibly be a delay in increasing interest rates. Despite the US's solid labour market, the FED insisted on not making any sudden changes to interest rates and to gradually monitor the situation instead.

With many economies worldwide experiencing some sort of deceleration, economic simulations have been utilized. The Bank of Japan used negative interest rates policy to reduce conditions pertaining to down payments of home buyers looking to purchase real estate. The European Central Bank (ECB) has signaled possibilities of reducing interest rates and injecting liquidity into the economy.

Estimating which direction the global economy would go is an extremely hard task to accomplish (even for economists themselves). Numerous contributing variables don’t make it any easier to successfully move into one (hopefully positive) direction. In today's temperamental economy, we advise you to make long-term investments for even risk distribution, enhanced dollar cost averaging and investment profits.