Global stock markets slump on Greece turmoil and China slowdown

Uncertainty about global economic growth and political instability have seen stock markets around the world fall today (21 August). Turmoil in Greece, where the ruling Syriza party called snap elections after prime minister Alexis Tsipras resigned, has cast doubt about the implementation of a bailout deal signed earlier this week.

Tsipras said he wants to re-establish confidence in Syriza after admitting bringing the country to the brink, although he added that he secured a good deal for Greece considering the situation the country found itself in.

The FTSE 100 fell 0.6% to 6,367.89 on 20 August on the news. Between April and August, the index has lost 10%. Augustin Eden, analyst at Accendo Markets, said in his morning note: "The really rather negative opening call comes amid further deterioration of the Chinese growth outlook (dire manufacturing data overnight) and political turmoil in Greece that continues to hamper investor sentiment."

However, Maike Currie, associate investment director at Fidelity Personal Investing, said the fall of the Footsie might be linked to other events. She said: "While this will spook some investors, it is important to remember that the FTSE 100 is not a reflection of the domestic economy, but rather a reflection of a handful of sectors like mining, oil and gas which account for about a quarter of the value of the index and they have performed poorly as commodity prices have plummeted."

The German DAX dropped almost 1.9% after the open to 10,236.92 on 21 August, compared to an opening call of 11,086.29 on 17 August. Western markets are expected to gain on bulls on the look out for a bargain believing the economy will turn around and positive Eurozone PMI data, which was up from 53.9 to 54.1 in August, a two-month high.

After the Purchasing Managers Index on China's factory activity fell in 47.1 from 47.8, Asian markets, which have already suffered, also dropped further. The Shanghai Composite, China's benchmark index, dropped 2.1%, while Hong Kong's Hang Seng lost 1.8%.