Stock markets around the world suffered further big declines Friday amid concerns over the Chinese economy and renewed uncertainty over Greece following the decision by Alexis Tsipras to resign as prime minister. “The phenomenal six-year bull market may finally meet its match in China-induced global deflation”.
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“Output growth in France’s private sector economy cooled to a four-month low in August, suggesting that third-quarter GDP may disappoint again following stagnation in second quarter”, said Markit economist Jack Kennedy.
Early in the session, the preliminary Caixin China Manufacturing Purchasing Managers’ Index, dropped to a 77-month low of 47.1 in August, compared with a final reading of 47.8 in July.
Friday’s reading was the lowest since March 2009, during the depths of the global financial crisis, and the sixth consecutive below the 50-point level.
The downdraft from China is rattling economies of its trade-reliant Asian neighbours and prompting many Western companies to reduce investments and look for ways to cut costs.
While a factory survey that is similar in Japan indicated an uptick there because of strong demand domestically, Tokyo policymakers are aware first hand of the dangers if China slows even further.
Last week, the central bank surprised markets by sharply devaluing the yuan, which the government said was part of reforms meant to make its exchange rate more market-oriented.
The speed with which China’s economy is losing steam has led to analysts warning the government may struggle to meet its growth target of 7 percent this year if it doesn’t ratchet up policy support.
World stock markets tumbled towards their worst week of the year and commodities got another kicking, as the data sent investors scurrying to the safety of bonds and gold. The Nikkei Japan PMI Manufacturing survey eased to 51.9 in August fro the flash estimate, below the 52.1 level seen.
U.S. producers will still pump more oil this year than at any time over the last 45 years with about 9.5 million barrels per day (bpd), which is interestingly around 40k barrels more than the Energy Information Agency (EIA) predicted in June.
“It points to weak growth that will do little to erode the spare capacity in the region”, said Jennifer McKeown at Capital Economics.
The Nasdaq slid 171.45 points, or 3.5 percent, to 4,706.04.
Forecasters polled by Reuters ahead of the data had expected both to remain broadly stable.
On Thursday, gold prices for December delivery surged USD25.30 or 2.2%, to settle at USD1,153.20 an ounce, on its safe haven appeal after global equity markets witnessed a massive sell-off with China in focus.
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The Australian and New Zealand dollars fell on Friday after another disappointing set of Chinese economic figures added to worries about global growth.
