It's been a turbulent couple of weeks for global equity
markets. A rout in Chinese stocks quickly spread to the West, with
US, UK and European equities selling off. Several stock indices
around the world fell more than 10% from their last peaks.
Worst-hit was the Shanghai Composite index. It closed last
Tuesday at an eight-month low, down 42% from its peak in June.
The sell-off provoked some pretty alarming newspaper headlines
and much talk of Beijing's "Black Monday". China has
replaced Grexit on the market's worry list.
We'd take this with a bit of a pinch of salt.
Equities, especially in China, are skittish and prone to big
moves. The relationship between equities and economic activity is
mixed. The old chestnut is that the equity market has predicted ten
of the last six recessions. Nobody forecast an economic boom in
China when the Shanghai equity index doubled in value between June
2014 and June 2015.
