07/10/2015
Lagarde hopes that the economic transition in china will be directed in an organized way.
the International Monetary Fund warns from the consequences of the recent market fluctuations
The head of the International Monetary Fund (IMF), Christine Lagarde said yesterday that the recent fluctuations in the international stock markets shows how economies can be effected by each other. According to Reuters, "What has been demonstrated in the last few weeks is how much Asia is at the core of the global economy, and how much disruption in one market in Asia can actually spill over to the rest of the world," Christine Lagarde told a conference in Indonesia's capital. Lagarde has added “the world economy was facing headwinds from China's rebalancing, Japan's slow growth, falling commodity prices and uncertainties surrounding higher U.S. interest rates.”
The Stocks and exchange prices has been effected massively since china’s decision to devalue the yuan last month. Lagarde has pointed out that Policies need to be tailored to each country, but mostly they would involve reinforcing defenses with prudent fiscal policy, reining in excessive credit growth, aligning exchange rates to act as shock absorbers, maintaining adequate foreign exchange reserves, and strengthening regulation. Lagarde has mentioned that deliberations has been going on with Chinese official regarding the great change that their country is going through. She has expressed her hope for this transition to be directed in an organized way. She said, “There has been talks with the Chinese government regarding this transition, and their plan to turn to a greater economy directed by the market rules. As well as their decision to internationalize the currency, which is a huge transition, that the fund hopes will be directed in an organized manner.”
As for the international market, as of yesterday, U.S. stocks opened up almost 1 percent on Wednesday, rebounding from steep losses a day earlier, after fresh intervention from China to support its markets helped calm jittery investors and oil prices reversed course to trade higher. The Dow Jones industrial average rose 154.47 points, or 0.96 percent, to 16,212.82, the S&P 500 gained 18.62 points, or 0.97 percent, to 1,932.47 and the Nasdaq composite added 64.45 points, or 1.39 percent, to 4,700.56.
The Chinese stocks has closed with a decline for the third day on a row, which constituted fears of the second biggest economy in the world continuing to slow down. Shanghai stocks opened down 4.39 percent and it recovered during the day to end 0.20 percent lower. The Shenzhen Component Index dipped 1.06 percent, and the ChiNext Index, China's NASDAQ-style board of growth enterprises, lost 1.82 percent. The Shanghai Composite Index has lost recently all its profits since the beginning of the current year, which led international investors to franticly sell stocks. Economic data that were released two days ago revealed that the industrial activity in china has witnessed in august the fastest decline since six years.
