State of Global Financial Markets

state of global finance markjets

Global financial markets have been suffering as of late in the New Year as new fears have arisen regarding China’s economy with the additional tensions that are arising between Iran and Saudi Arabia. This is coupled with the fact that oil is dropping low and at the lowest point it’s been in over a decade.

Oil began sliding in eastern Asia where China allowed their currency, the Yuan to weaken made concerns rise over the fact that China has been weaker than others thought. After the oil began slipping in China it was then followed in Europe as the worlds largest oil producers prevented OPEC from agreeing on cutting production and stabilizing prices by bringing the supply back to levels that didn’t completely outpace demand.

Following the decline in the European and middle eastern markets, the decline continued on into North America after the news of US oil stocks rising 10%. Even though there was a slight increase, many analysts are expecting the price to fall back to $30 a barrel in the next month. Non-OPEC production in the North and in Brazil is beginning to fall but that doesn’t mean the problem is over with yet.

Saudis have usually encouraged OPEC to reduce output when there are long periods of oil prices being low so that it won’t affect their own business.  During this downtrend this hasn’t been the case any many are seeing this as a deliberate ploy to boot the new players out of the market that include American Oil and Gas companies to shut them out of the business.  Unfortunately for them this plan isn’t working that well for them right now. American output has stayed strong after its large surge in recent years. Even after oil prices have drastically fallen from their $115 peak in June of 2014.

Prices at the pump are going down for a lot of people everywhere as these games are played out between the major players. The standoff between Iran and Saudi Arabia is only going to get larger after the execution of Shia Muslims and terrorist attacks on oil tankers.

Chinese Economy

The Chinese service sector has been growing at its lowest level for over a year and a half now. An analyst at London’s Fathom said that China was only growing at around 2.4% a year as opposed to the 6.9% it should have been from official stats. Laura Eaton the analyst said that:

“China has a longstanding problem of non-performing loans and while policy stimulus may stall the slowdown in growth, it is not going to solve the country’s long-term problems,” Eaton said. She estimated that unemployment, officially 4%, was currently 7% and likely to rise to 11%.

Along with the Chinese economy falling and the problems between oil producing companies, it has done a number in many economies on a global scale.  2016 is shaping up to be an interesting year on a global scale as the major issues are oil and a weaker Chinese economy.