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Led By Big Sell-Off In China, Global Markets Continue Their Slump

Led by an 8.5 percent drop in China's Shanghai composite index, global stock markets have taken a dive.

CNBC reports:

"Panic spread to European markets, with the pan-European FTSEurofirst 300 as much as 3 percent in early London trading. All major bourses were off a similar amount. The index has shed over $1 trillion in market value in August so far."Japan's Nikkei 225 index also finished at its lowest closing level since February 23, as a double whammy of China-related fears and a rejuvenated yen brought the bourse down by its biggest one-day drop in more than 2 years."

Of course, in the U.S. all this comes after a brutal week on Wall Street. On Friday the Dow closed 531 points lower in correction territory for the first time since 2011.

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As Bloomberg sees it, that correction has been caused by two things: The U.S. finally succumbed to the Chinese rout and investors are finally starting to see a Federal Reserve interest hike as a reality.

Bloomberg reports:

"... Speculation had been building all year for the Federal Reserve to raise interest rates in September for the first time since 2006, following the end of quantitative easing in 2014. Traders are now pricing in less than a one-in-three chance the central bank will act next month, from about 48 percent just before the yuan devaluation. "'The chickens are coming home to roost,' [Thomas Thygesen, SEB's head of cross-asset strategy,] said. 'We've been too hopeful that Fed tapering didn't matter, that they could hike interest rates and we'd still have a healthy economy. Since the Fed stopped bond purchases, they've been choking the life out of global manufacturing and that matters most for commodities and emerging markets.'"

We'll update this post as the markets open in the U.S.

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