The price of oil sank to its lowest level in 12 years Thursday.
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At 9.42 a.m., trading was suspended for 15 minutes after the Hushen 300 dropped by over five percent. “The circuit breaker mechanism was not the main reason for the market slump”. The action prompted markets in Europe to retreat and then spread to the US.
Among those taking hits, Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU) and Weibo (NASDAQ:WB) shares were all down 6%, while NetEase (NASDAQ:NTES) and JD.com (NASDAQ:JD) were down 5% in afternoon trading on the stock market today.
After an initial steep fall of almost 300 points, the Dow Jones Industrial Average benchmark is now at 16,702 – a drop of 203 points, or about 1.2 percent.
The Standard & Poor’s 500 index lost 47 points, or 2.4 percent, to 1,943.
Amid the respite in markets on Friday, investors will look toward USA payrolls data for clues on the pace of Federal Reserve interest-rate increases.
Regulators announced the mechanism would be suspended late on Thursday night after plunges this week repeatedly triggered the circuit breakers, which were implemented on Monday.
“It is shaping up to be another (wildly) negative day in global equity markets”, said Douglas Porter, chief economist with BMO Financial Group, in a note to clients.
The index dived a further two percent in just two minutes after reopening at 9:57 am, and trading was ceased.
Experts blame the global market plunge on investor worries that growth is slowing in China, the world’s second-largest economy and a source of global economic growth for many years.
Thursday’s selling came after the Chinese government allowed its currency to weaken against the dollar in a reflection of sluggishness in the country’s giant economy.
The People’s Bank of China set the yuan’s daily fixing at 6.5636 per dollar.
Thursday’s exchange rate of 6.5646 yuan to the dollar was the lowest since March 2011. The China Securities Regulatory Commission used its “circuit-breaker” system to keep share prices from falling even further.
This also affected stock markets around the world. The euro slipped 0.5 per cent to $1.0880.
The plunge in China Thursday started a global stock rout that sent the Dow tumbling nearly 400 points and thrust the Nasdaq back into correction territory. Instead, he said, “volatility is endogenous, and is a reflection of heightened earnings risks during [the] intense reform and restructuring” that China’s economy and markets are undergoing.
After prices plunged in June, the government banned sales by big shareholders, ordered state companies to buy stock, cut interest rates and cancelled initial public offerings.
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Chinese officials enacted the rule to cool the market, but it ended up causing concern among investors, says Johnny Fang.
