Events of the past few days echo those that led to the Wall Street crash, so optimism about long-term impact on the west of China’s crisis is premature

On day one the stock market fell by 13%. On day two it fell by a further 12%. On day three hopes were high the storm had blown over after equity prices recouped the previous session’s losses. Let this be a cautionary tale. These figures relate not to the Shanghai Composite index in August 2015 but the Dow Jones Industrial Average in October 1929.

Even in the most savage bear markets prices never fall in a straight line. Instead, within a downward trend big daily falls are punctuated by sizeable daily rallies. Events of the past few days conform to this pattern, at least in Europe. Shares in London, Frankfurt and Paris fell heavily on Friday and Monday, then recovered on Tuesday.

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Source: The Guardian Circular Economy RSS