Asian and European markets reacted negatively to the failure of the G20 to come out with a plan to stimulate growth. Investors were also worried that the Federal Reserve might boost its interest rates before the end of the year as a follow-up to its initial rate hike of 25 basis points last December. Negative sentiments in the stock and bond markets boosted gold to post its best monthly gain in four years.
Asia Closes In The Red
China’s SSE Composite Index closed down with a loss of 79.23 points or 2.86% while Japan’s Nikkei 225 shed 161.65 points or 1.0%. Similarly, Hong Kong’s Hang Seng index fell 252.22 points or 1.3%.
On Friday and Saturday, central bankers together with G20 Finance Ministers came to an agreement to use every possible tool to reach the economic goals of the group. These included fiscal, monetary, and structural tools. However, there were no concrete plans for coordinated stimulus as some investors were expecting following concerns of a slowdown in China.
European Markets Also Down
In the absence of any favorable developments from the G20 meeting, traders seemed unable to take fresh positions. As a result, the European stock exchange’s Euro STOXX 50 was down by 1.12% around 6 Eastern Time while London’s FTSE 100 shed 0.60%. Similarly, German’s DAX was trading around 1.5% and FTSEurofirst 300 index dipped 1%. The overall reaction reflected disappointment as investors were looking for a unified declaration to do something to prevent the global economy from going into recession.
Gold continued its march higher though, with the yellow metal advancing 0.7% to $1,230 an ounce on Monday. Significantly, the precious metal has seen 10% gains since bottoming marking its best performance in four years.