China, Emerging Markets Trigger Global Sell-Off

The global sell-off of stocks continued Monday with all major indexes in the U.S. declining.
Posted at 2:28 PM, Jan 27, 2014

Global markets might be in for a second consecutive rough week. Fears of a slowdown in emerging markets triggered a powerful global sell-off in stocks last week — the most severe in more than two years.

"The selloff in the markets we saw on Friday is continuing this morning in Asia." (Via Fox Business)

"This selloff has really circulated the globe. Japan overnight, the lowest level in two months. Hong Kong, South Korea, 2 percent losses — that's big!" (Via CNN)

"Yeah, we've had sell-offs continue. Markets were down in Asia, they're down in Europe, and it looks like our futures are pointing to a lower open here as well." (Via WMAQ)

On Friday, the Dow Jones industrial average fell more than 300 points and a whopping 3.5 percent for the week. (Via Yahoo)

At the open on Monday, stocks in the U.S. appeared to be stabilizing, but tickers quickly started turning red yet again. (Via Bloomberg)

Analysts are pointing at the crisis in Latin America. In Argentina, rampant inflation ignited fears the country is on the brink of a major financial collapse. 

Demand for commodities, a staple of the economy there, are falling - especially in China. The New York Times quoted an 80-year-old psychologist who said,

"In 80 years, there've been tough times, but it's never been as bad as this. ... I'm not going to buy dollars when my monthly pension doesn't even stretch to buy food." 

But it's not just emerging markets that are spooking traders. The financial system in the world's second largest economy is floundering.

There were unconfirmed reports, first by Forbes, that all banks in China had halted cash transfers as the banks were running out of money.

The article is now unavailable, and some fired back calling the report "entirely misleading." The practice of halting transfers is believed to be more routine than the article framed it. 

Either way, state-run Xinhua says investors in China are opting for online products instead of banks. The most popular being Yu'E Bao — run by Alibaba. Yu'E Bao is now the "single biggest public fund in China" with more than $31 billion in funds at the end of 2013. 

The paper says simply, "China's banks must evolve or perish."

All this is coming at a time when the Federal Reserve is scaling back its purchases. (Via Wikimedia Commons / AgnosticPreachersKid)

Many were also predicting a market correction in 2014 — some calling for a drop of 10 percent or more. (Via Google)

Gold, which just last year had its worst year since 1981, has seen a modest recovery so far in 2014 as investors in Asia still view the precious metal as a safe haven.