The previous month of August will always be a month to remember in the financial market. Despite the general believe that August is a less volatile month because many traders especially institutions always go on holiday around this time of the year. But this time around, the reversal was the case; volatility was a matter of fact 10-times the normal volatility we see on a normal trading day.
The month of August has made the world realise that if China is unstable, the world economy will be affected regardless of how powerful. It is no news anymore that china is slowing down and this is weighing on the global economy. The slowdown in china has affected the global stock market: Shanghai composite has lost more than 30%of its value and we had the black Monday in the last week of August which saw Dow Jones drop more than 1000 points on opening. Crude oil also entered a bear market, dropping all the way from $49 to 37$. This can also be attributed to the slowdown in china which has affected demand for consumption. China is the biggest consumer of oil products after the US. Gold prices dropped to $1077, the lowest price since 2010.
September seems to still be suffering from the spill over effect from August; the slowdown in china is still weighing down on the stock market, DAX is still trading at the lows of 10,000 while Dow Jones is trading at 16,000 areas. The manufacturing ISM figures released yesterday from China also confirms that china is still in some sort of economic trouble. This month is expected to be a decisive month to show if the FED will raise rates before the end of the year or probably in 2016. This solely depends on economic data coming from the US this week. We have the NFP, ISM manufacturing data, ADP employment data. This data are stronger indication of the state of the Economy, positive figures might give us more hints regarding if the FED will raise rates going into the FOMC i0n the 14-15 of September. The situation in china is also a crucial factor to be considered, if the situation continues to hit the global economy, FED might have to give it more time before raising rates.