Global stock prices tumble for second day (VIDEOS)
August 25, 2015, 4:51 pm

Chinese stocks have plunged for a second day after worries over China`s slowing growth triggered a global sell-off.The Shanghai Composite, China`s main stock exchange, fell 7.6% on Tuesday - after losing 8.5% on what state media have called China`s "Black Monday".It was the worst fall since 2007 and caused sharp drops in markets in the US and EuropeTokyo`s Nikkei index had a volatile day, closing 4% lower.

The Shanghai index ended the day 245 points lower at 2,964.97.After decades of rapid growth, China is slowing down, and investors globally are worried that firms and countries which rely on high demand from China - the world`s second largest economy and the second largest importer of both goods and commercial services - will be affected.

Some investors had hoped that the Chinese government might make a dramatic intervention to help.But after two months of attempting and failing to shore up the markets at a cost of hundreds of billions of dollars in state funds, even Beijing now seems to be thinking hard about what stock prices are sustainable in the long term.For a government whose legitimacy rests on economic competence, and which had hoped that a rising stock market would help ease the problems of a wider economic slowdown, this financial crisis still carries real political dangers.

 

Chinese shares had experienced a year-long rally - mainly fuelled by investors borrowing money to buy shares - which came to an end in June.The Chinese government then intervened in financial markets, to try to maintain momentum in the economy.Two weeks ago the central bank devalued the currency, the yuan - this raised fresh concerns that China`s economy could be in worse shape than previously thought.A cheaper currency lowers the price of China`s exports, making them more attractive to global firms.Elsewhere in Asia and Australia on Tuesday, markets beat expectations, opening lower but then returning back to positive territory:Korea`s KOSPI gained almost 1%Australia`s S&P ASX/200 ended the day 2.7% higherThe dollar remained weak at 119.15 yen, up from a seven month low of 118.51 yen in New York on Monday.Commodity prices also recovered after Monday`s falls, although oil remains under pressure because of a global oversupply.Overnight, the Europe and the US saw dramatic falls, but are expected to show some signs of recovery when they open on Tuesday.Wall Street`s Dow Jones fell 6%, then almost recovered its losses before closing 3.6% lower.London`s FTSE 100 index closed down 4.6%.Major markets in France and Germany down by 5.5% and 4.96% respectively.

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