Worries about China’s problems and concerns about slow growth in France and Italy hammered the European stock markets at the open. The FTSE dropped 1.3% to 6,006. The DAX was off 1% to 10,038 and the CAC 40 was down 1.1% 4,516.
The trouble raises the issue of whether central banks in the world’s largest economies will cut rates again. China has done it five times this year. Central bankers in Europe and the United States seem likely to raise rates in the next two months, particularly the Federal Reserve. Prominent economists have said a rate increase could slow a fragile American economy. Ray Dalio of huge hedge fund Bridgewater has suggested the Fed may actually ease.
If the markets continue to collapse, the European Central Bank and Fed may have no choice. However, with interest rates close to zero, it is a wonder as to where they can go.
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