Storm #1: Europe
As you may know, part of the bearish sentiment stemmed from a market rumor suggesting Spain might soon follow Greece and ask the EU for a massive bailout – to the tune of for 280 billion euros.
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Spanish Prime Minister Jose Luis Rodriguez Zapatero denied the claims calling the chatter "complete madness."
Nonetheless, investors dumped stocks worried that problems in Europe were far from solved; the euro tumbled to a one-year low against the dollar.
Storm #2: China
But, as you may not know, part of the bearish sentiment in the market also stemmed from Beijing’s decision to raise banks' reserve requirements to fend off inflation. It’s the third such increase in China this year.
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“All sectors (in China) are under pressure," says Zheng Weigang, analyst at Shanghai Securities with bank and real estate stocks leading the plunge.
As a result the Shanghai Composite, China's key stock index, fell 1.2% on Tuesday to its lowest close in seven months.
What does it all mean?
If you watch Fast Money regularly, you may remember that Miller Tabak strategist Peter Bookvar has expressed concerns that investors can’t withstand a one, two punch from both China and Europe.
Investors didn’t want to buy umbrellas despite the gathering storm clouds, he says.
A lot of US investors think it’s all about the US and everything else can take care of itself but in a globalized world that’s not the case, Boockvar adds.
Europe is China’s biggest trading partner and internally China is trying to slow down. China’s slower growth impacts Taiwan, Singapore and South Korea. They export to China who then exports to Europe. We’re all in this together.
HATTIP: CNBC
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