Trading in Chinese stocks was suspended Thursday after a key index plunged 7 percent.
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Chinese stock investors play cards in a brokerage house in Beijing, Friday, Jan. 8, 2016.
The Toronto Stock Exchange lost almost two per cent of its value in early trading Thursday morning amid fresh upheaval around the world following another early shutdown of two major Chinese stock markets. A investor rests near a display board showing the plunge in the Shanghai Composite Index at a brokerage in Beijing, China, Thursday, Jan. 7, 2016.
(AP Photo/Mark Schiefelbein). Chinese investors monitor stock prices in a brokerage house in Beijing, Friday, Jan. 8, 2016.
DOLLAR BOUNCE: The dollar firmed further following the figures as traders priced in the prospect of more interest rate hikes: The euro was down 0.8 percent at $1.0825 while the dollar was 0.6 percent stronger at 118.51 yen.
The rough start to 2016 is being blamed on several factors.
“Investors recognize that the PBOC’s actions serve as confirmation that China’s economy is slowing in a meaningful fashion, which has real repercussions on global… growth”, Mike O’Rourke, chief market strategist at JonesTrading, wrote in a note.
The price of USA crude oil plummeted to its lowest level in almost 12 years because of worries that the slowdown in China will translate into lower demand for energy.
China’s currency controls link the yuan to the USA dollar, which has risen strongly over the past year and resulted in the yuan becoming 10-15 percent overvalued.
It was the shortest trading time in China’s capital market history, Xinhua news agency reported. Health care stocks were the biggest gainers as drugmakers moved modestly higher.
Trading in mainland stocks closed for the day when the CSI 300, a benchmark of blue chips in Shanghai and Shenzhen, fell 7%. The circuit breaker measures were first introduced on January 1. Economists were expecting the yuan to decline as China’s economy weakens but what’s come as a shock are a few sudden movements over the past half year.
“Markets will be waiting to see the Chinese government’s determination to prop up the stock market and the currency into next week before any major recovery rally is likely to be seen”, he said.
Sino Biopharmaceutical plunged 20 per cent in Hong Kong, the biggest decline among emerging-market shares, after agreeing to pay 4.9 billion yuan ($744 million) for shares in China Cinda Asset Management.
KEEPING SCORE: In Europe, the FTSE 100 index of leading British shares was up 0.9 percent at 6,005 while Germany’s DAX rose 1.1 percent to 10,091. Natural gas rose 11.5 cents, or 5.1 percent, to $2.382 per 1,000 cubic feet.
Meanwhile Wall Street opened down sharply, with the Dow down 1.3 per cent in early trading. “Investors can buy and sell as they wish”, said Tian Weidong, analyst at Kaiyuan Securities. Thursday’s selling was linked to weakness in the yuan, as the government’s decision to let the currency get weaker may be a bad sign of weakness in China’s economy.
Regulators said this week that such sales will be limited to private transactions to avoid fuelling further volatility.
Oil plunged to around levels not seen since 2008, with the February contract for benchmark crude oil losing 70 cents to close at US$33.27 a barrel.
In New York, the Dow Jones average of 30 stocks was up 17.33 points at 16,531.43, after falling almost 400 points on Thursday. The Nasdaq composite index dropped 146.34 points, or 3 percent, to 4,689.43.
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In currency markets, the dollar fell to $1.0883 from $1.0917 on Thursday.
