Widespread ‘Panic Mode’ for Global Markets as China Declares Currency Drop

Stocks in Asia collapsed Monday, the lowest it has gotten in 3 years following China's fast slump in equities. As China's equity fall gathered pace, riskier assets departed as world markets feared a global economic slowdown because of China.

The falls could reportedly go on in the global session later as seen in a "2.6 percent fall in S&P 500 mini futures to a 10-month trough" at Asian trading hours.

Because China decided to devalue its currency, more than $3.3 trillion was erased from global equities. A wave of selling reportedly emerged across markets.

According to Bloomberg, many are worried of a slower economic growth with strong dollar as well as the downfall in oil prices taking its toll on corporate earnings. As a result, the Federal Reserve is thinking about boosting the interest rates, a first since 2006.

China's decision of devaluing the yuan took place two weeks ago. As the decision heightened concerns in the state of its economy, safe-haven government bonds as well as the yen rallied on the financial market unrest.

"Markets are panicking. Things are starting to look like the Asian financial crisis in the late 1990s. Speculators are selling assets that seem the most vulnerable," according to Takako Masai, head of research at Shinsei Bank in Tokyo.

As China's currency tumbled, markets in countries with economic fortunes tied to the Asian country tumbled as well. On Friday, Japan's Nikkei average reportedly crashed almost 3% to six-week lows. In South Korea, the Kopsi index fell 1.92%.

In Europe, shares also dropped to a seven-month low. According to The Guardian, the "FTSEurofirst 300 index of top European shares fell 1% to 1,462.78 points." This is reportedly the lowest it has been since January and looking to become its biggest fall in 2015.

In Germany, its DAX reportedly declined 0.5%. Since April, this decline has been 16% below its record highs.

"Global markets are in panic mode as the full scale of China's slowdown becomes clearer," according to Angus Nicholson from IG Markets in Sydney.

According to Reuters, some decided to intervene in order to stop the speed of their currency's drop. In South Korea, authorities were reportedly suspected of selling dollars to put a dent to the fall of won.

As for the dollar, though it suffered less grave effects due to China's decision, it however suffered against key peers like the euro and yen. The dollar has been down 0.8 percent at 121.00 yen after it hit a low of 120.73 in six weeks. The euro rose to a high of $1.1496 in 6-1/2 months.