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Global Financial Markets Are Poised For Another Turbulent Week
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Global Financial Markets Are Poised For Another Turbulent Week

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Global Financial Markets Are Poised For Another Turbulent Week

Global Financial Markets Are Poised For Another Turbulent Week
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After a volatile week in China last week, global markets are braced for more chaos with hopes that healthy U.S. employment numbers may improve the climate.

STEVE INSKEEP, HOST:

Stock markets in Asia dropped again today. That comes after a lousy first week of the year for stocks around the globe. In this country, the S&P 500 lost 6 percent of its value in a week. The trouble is blamed on concerns about China's economy. And we're going to talk about this with NPR's Jim Zarroli. Jim, good morning.

JIM ZARROLI, BYLINE: Good morning.

INSKEEP: Not off to a good start this year.

ZARROLI: No, no. Last week was something of a disaster. It was bad all over the world, in Europe, in Asian markets, in Australia. And what's driving the markets down is really this sort of generalized concern about global growth. There are so many places where growth is slowing and demand is weak. And in places like Russia and Brazil, it's only getting worse. So this is not something that's going to be fixed quickly. It's going to mean that a lot of the fears about growth have to be addressed.

INSKEEP: And you are wise to point out that this is a concern that spreads farther than China. But many of the countries that are experiencing trouble have close ties to China. I'm thinking about reports on this program about Brazil losing its Chinese markets. What is happening, as best anyone can tell, to the Chinese economy?

ZARROLI: You're right. China has an impact all over the world, especially in countries that sell commodities. China's government right now is really trying to make it look like it has gotten a grip on the situation. It got rid of the circuit breakers in the stock market that shut down trading on Monday and Thursday. These were supposed to kick in when stocks fell too much. They're a way of curbing volatility. But in fact, they seemed to make the situation worse. And then over the weekend, you had Chinese officials trying to talk up the economy. They said the financial system is stable and healthy. But it's not clear how much people believe that. You're just seeing this slowdown in China's economy. And China has been such an engine of growth for the rest of the world for so long that people are worried about what it means.

INSKEEP: Are people losing confidence in the ability of China's government to manage the situation?

ZARROLI: Oh, I think they are, definitely. I think, you know, for a long time, China's government has done a good job at steering the economy, at doing what it needed to do to create jobs and create growth. And I think there's just this overall feeling like it's trying different things. It's going in different directions. But it really just doesn't have a grip on the situation. It's tough because what it has to do is really reorient its economy from the kind of investment-driven economy that we've seen for so long to be more consumer-driven. And that's a real big change.

INSKEEP: But help me understand why stocks are also falling in the United States, Jim. Haven't we actually had more and more positive news within the U.S. in recent months?

ZARROLI: Yeah. For instance, the job market was so good on Friday. I think that reflects the fact that the jobs report is backward-looking. But of course, the stock market looks forward. In other words, people buy and sell stocks based on, you know, what they think is going to happen down the road. And right now there's just a lot of concern about corporate profits. Are they going to fall? Of course you're seeing something of a bloodbath in the oil and gas sector. But then this week, we're going to get a look at bank profits for the fourth quarter of the year. They weren't very good in the third quarter. And they're expected to be even worse in the fourth quarter. So there are questions about where corporate profits and the overall stock market is going in the United States.

INSKEEP: NPR's Jim Zarroli is watching the markets from New York. Jim, thanks very much.

ZARROLI: You're welcome.

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