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What's going on?

Chinese stocks were feeling worse for wear after the Lunar New Year break, and they fell a head-throbbing 8%.

What does this mean?

Chinese markets always close for the Lunar New Year, but this year saw that national holiday extended due to the coronavirus. So when the market reopened on Monday, stocks immediately plummeted. It couldve been worse, mind you: trading was put on pause after 80% of stocks fell 10% in price and hit Chinas daily limit.

Normally a crash like that would spark similar sell-offs around the world, but American and European stocks held firm. It probably didn’t come as much of a surprise, after all: Hong Kongs stock market which continued trading while China’s was closed last week has been losing plenty of its own value, and investors were likely expecting the Chinese market to waste no time catching up. Or, er, down.

Why should I care?

For markets: Banking on a rescue.
Chinas government is doing all it can to keep markets from falling more than they already have. On Monday, the countrys central bank poured almost $200 billion into the economy and slashed interest rates to make borrowing cheaper. Its likely hoping that more money going around will stop investors from selling their stocks to free up cash, which might help keep markets propped up.

The bigger picture: How low can we go?
The stock market downturn was likely driven by fears that the coronavirus will take a bite out of Chinese and global growth. Chinas shoppers spent $140 billion during last years Lunar holiday: money thatll likely go unspent this year with so many on lockdown. Factories thatve been ordered to stay closed, meanwhile, are likely to feel the effects of a production nosedive. Analysts reckon that might lead global manufacturing to hit its lowest level since 2009 though theyve noted investors who buy the dip might do well when things eventually pick up again.

Originally posted as part of the Finimize daily email.

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