Sentiment has turned more cautious on stocks amid the Federal Reserve’s first interest-rate increase since 2006, and forecasts for little to no growth in corporate earnings before the spring.
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USA stocks dropped Wednesday as investors fretted about signs of belligerence from North Korea and more weakening of China’s economy, which pummeled energy companies.
As market analysts sought to explain what happened on Monday, the People’s Bank of China (PBOC) pumped in almost US$20 billion into money markets on Tuesday, its largest cash injection since September, in a bid to prop up the A-share market.
Despite that, the Shanghai index fell another 3 percent on Tuesday before recovering to end the day down 0.3 percent.
In fact, on Monday, when stocks tanked, the plunge was first set off by the release of a weak Purchasing Managers’ Index for the country, with a reading below 50, meaning that manufacturing activity would be poor in the near future.
Concerns about what a slowing China means for oil demand have helped ravage oil prices – a trend that in turn hurts global economies and further unsettles stocks. The dollar gained 0.1 percent against the South Korean won and rose 0.3 percent against India’s rupee. In the spot market, the currency weakened 0.1 percent to 66.90 a dollar after falling to a three-week low of 66.9450, according to prices from local banks compiled by Bloomberg.
USA stock futures are dropping by more than 1.5%, and markets in Europe and Asia are mostly lower.
Investors were also unnerved by heightened tensions between Saudi Arabia, a huge oil supplier, and Iran. The falls were sufficiently marked to trigger an automatic suspension to trading for the day since a 15 minute pause after losses passed the 5% level didn’t cause any rally. One showed that China’s services sector grew at the weakest pace in 17 months in December – another report revealed that the country’s key factory sector had contracted.
“The circuit breaker is brand-new for China, …, so the market needs to time to gradually adapt”. Australia’s ASX was down 1.6% as miners led the declines as they had in the northern hemisphere the previous day.
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USA benchmark West Texas Intermediate crude fell 1.2 per cent, to $36.32 a barrel in NY. Chevron Corp. sank 3.2 percent, while copper producer Freeport- McMoRan Inc. slid 5.9 percent. The contract fell 28 cents to close at $36.76 a barrel on Monday. China’s currency has stabilized after interventions but the gap between the tightly managed onshore yuan and its freer offshore counterpart widened to 1.7 percent. On the Nasdaq, 1,185 issues rose and 979 fell.
