August is shaping up to be the cruellest month in stock markets this year, with stocks in Europe and Asia down more than 10 per cent since the beginning of the month.

That's a full correction – usually defined as a drop of 10 per cent or more.

Stocks on China's Shanghai index are down close to 40 per cent from their peak in June, popping a stock market bubble fuelled by government meddling and neophyte investors. In August, both the Shanghai index and Hang Seng index fell 11.5 per cent.

Europe's Stoxx index declined 10.1 per cent in August.

The losses on North American markets are more modest. The TSX is down six points at the close of trading to 13,859. Its loss for the month is 4.2 per cent.

The Dow is off 115 points at 16,528 and down 6.1 per cent on the month.

However, compared with where it was a year ago, the TSX/S&P index appears chastened, down 11.3 per cent. The Dow has had a better year, down just 3.3 per cent

And that's why analysts are debating whether the bull market that began after the financial crisis has run its course and the bear has ended its hibernation.

There has been no real reset of New York market prices since late 2011, one many investors believe is overdue.

The U.S. Federal Reserve is currently debating the economic data it has gathered in the past few months – GDP growing strongly, unemployment in decline, inflation not quite where it wants it to be – in an effort to decide when to raise interest rates.

On Monday, Fed vice chairman Stanley Fisher said there was a "pretty strong case" for raising rates in September, disappointing analysts who believed the recent market rout might mean that hike would move to later in the year.

"This is a market that is walking on glass. China seems to be the central theme feeding into a lot of these things, but today the focus is very much on U.S. interest rates again," said James McGlew, executive director of corporate stockbrokering at Argonaut in Australia.

Would a rate hike necessarily depress stocks further?

Corrections 'inevitable'

Not according to Citibank, whose analysts believe investors are pricing in a mild global recession this year.

"Before we all get too depressed, it's worth pointing out that corrections are an inevitable annual event even in bull markets," said Citi analysts in a note to clients. "Investors shouldn't confuse these with the beginning of the next global bear market."

An investor scratches his head near an electronic board displaying market movements at a brokerage in Beijing on Monday. Shanghai's main index fell 40 per cent since June. (Associated Press) However, the economic picture out of China, where growth seems set to slow this year, is less reassuring.

China's growth target is seven per cent, but now economists say it may achieve just five per cent. That slows demand for every natural resource and commodity other countries export to the world's second-biggest economy.

There are questions about the leadership of Xi Jinping, who allowed state-run media to promote stocks for inexperienced individual investors. The Shanghai Composite Index rocketed 150 per cent in the year through mid-June before it fell and brought global stocks down with it.

Today, heads started to roll, with a state media official from China's securities regulator and four senior executives with China's largest brokerage confessing to insider trading.

In addition a reporter who said he had spread false information that had caused "panic and disorder" has been arrested, according to Xinhua.