The world’s financial markets are being tossed by developments in China, where the central bank made a surprise move to adjust its currency rate and two major stock exchanges were closed early Thursday because of a sudden drop in stock prices.
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(AP Photo/Eugene Hoshiko). A woman is reflected on an electronic stock board of a securities firm in Tokyo, Thursday, Jan. 7, 2016.
That was the opinion of some US investment strategists after another free-fall on China’s main stock market reverberated around the globe Thursday and sent the Dow Jones average to a loss of almost 400 points. Investors gather near a display board showing the plunge in the Shanghai Composite Index at a brokerage in Beijing, China, Thursday, Jan. 7, 2016.
The circuit breaker was triggered on both Monday and Thursday, as plunges in the Hushen 300 Index reached seven percent on both trading days.
The renewed share suspension in China caused global shares to fall sharply on Thursday, with Wall Street opening more than 1 percent lower and European markets trading 2 percent down.
The Canadian dollar remained near 12 1/2-year lows at 71.07 cents US but rose 0.05 of a cent from Wednesday’s close.
“U.S. markets are getting wrapped in with global markets, and rightfully so, but so far there isn’t massive panic selling here”, said Jonathan Corpina, senior managing partner at Meridian Equity Partners. The tech-heavy Nasdaq suffered the deepest losses, falling 3 percent.
On Friday, the People’s Bank of China set the yuan’s midpoint rate at 6.5636 per dollar prior to market open, firmer than the previous fix of 6.5646, and firmer than the previous day’s closing quote of 6.5929.
Japan’s benchmark Nikkei 225 index fell 1.5 percent to 17,920.61 and South Korea’s Kospi lost 1 percent to 1,905.51.
In Europe, the FTSE 100 index fell 2.5 percent in early London trading, while Germany’s Dax index slipped 3.5 percent.
That’s the biggest one-day fall since late August a year ago, when markets went through a similar bout of Chinese-induced turbulence.
The Hang Seng index in Hong Kong was up 0.8 per cent at 20,491.88 points.
On Thursday, offshore yuan hit a record low since the market launched in 2010 of 6.7511 to the United States dollar. Beijing keeps its markets sealed off from global capital flows, but due to the vast size of China’s economy, foreign investors watch them closely and react to volatility.
The yuan’s link to the dollar meant it soared as the US currency climbed over the past year, making it overvalued by 10 to 15 per cent against those of other developing countries.
“The mechanism was introduced with the aim of providing a calm-down period for the market to avoid or reduce hasty trading decisions in the case of sharp fluctuations, protecting the interests of investors”, Deng said. “It’s the new year and people are scratching their heads, they’re not quite ready to buy the dip”. Macy’s, which lost half its value since July, rose $1.18, or 3.3 percent, to $37.33 after the company said it will close 40 stores and eliminate more jobs.
However the price of copper declined 6.6 cents, or 3.2 percent, to $2.022 a pound.
As for the Chinese stock market itself, valuations are actually cheaper than the Australian stock market, he said.
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The sell-off came after China allowed its currency to weaken further, a risky omen for the world’s second-largest economy. The dollar fell to 117.750 yen from 118.38 yen.
