Shares on major exchanges fell for a sixth consecutive day on Thursday while crude prices bounced back from multi-year lows as volatile markets digested another move lower in the yuan and Chinese efforts to stabilise a sinking stock market.
Advertisement
More than 30 billion pounds were wiped off British blue chips on Thursday after China allowed its currency to weaken faster than before, rocking global markets and sending commodity shares to their lowest levels for about a decade.
At 9:42 a.m., trading was suspended for 15 minutes after the Hushen 300 dropped by over 5 percent.
China’s stock market has skidded this year as the government prepares to remove measures that were introduced last year to prop up share prices after a meltdown in June.
Interesting times lie ahead for the Chinese markets, especially as the outlook for the world’s second biggest economy appears grim. The yield on 10-year Treasury bond was unchanged at 2.17 percent.
“Many people are asking how far Chinese equities could fall”, he said in a market commentary.
China was hoping the introduction of circuit breakers would help prevent a repeat of last summer’s market crash.
The upheaval disrupted the ruling Communist Party’s plans to use the stock markets as a tool to make China’s state-dominated economy more competitive and productive.
The latest cause for worry was a weakening in China’s currency to its lowest level since March 2011.
China opted to shut down its markets thanks to its new so-called circuit breaker rule, which pauses trading if China’s CSI 300 Index goes down by 5 percent and ends it for the day if it dips to the 7 percent threshold.
Hong Kong’s Hang Seng shed 2.4 percent to 20,479.39 and Australia’s S&P/ASX 200 retreated 2 percent to 5,020.40.
USA stocks fell to a three-month low and the Dow Jones Industrial is down 3% week-to-date.
Global oil prices have crashed 70% since mid-2014 as near-record output from major producers such as the Organisation of the Petroleum Exporting Countries (Opec), Russia and North America has left storage tanks brimming with supplies.
Thursday was the eighth consecutive trading session the PBoC has lowered the rate, reviving concerns over the unit.
Analysts said the first suspension is triggered too quickly, and China’s army of small investors use the cooling off period to line up additional sell orders. Moreover, given the fragile sentiment in the markets at the moment, the mere knowledge that a number of possible large sellers will return to the markets could be rather self-fulfilling.
Advertisement
Nicholson said, “It’s hard to see the circuit-breakers surviving long in their current form, given they only seem to be further contributing to the volatility in the Chinese market”. The S&P 500 index lost 18.48 points to 1,971.78 and the Nasdaq declined by 59.29 points at 4,776.47.
