China’s benchmark index somewhat steadied after the carnage on Monday. By the end of trading Thursday, Hong Kong had slumped more than three percent and Tokyo shed 2.2 percent.
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Trader Tommy Kalikas works on the floor of the New York Stock Exchange, Wednesday, Jan. 6, 2016.
Investors read it as a sign that China’s economy might be slowing down faster than previously thought.
The weaker economy in China “reignited fears of a global slowdown”, according to Reuters.
“There’s uncertainty globally over whether Chinese authorities have the firepower, or perhaps more worryingly, have the will to use it, to shore up the stock market and the wider economy”, said Jasper Lawler, a markets analyst with CMC Markets in London.
Beijing has been trying to restore investor confidence after markets plunged in June following huge gains in the preceding year.
The government wanted to stem fears that stocks would free fall for a second straight day.
The meager showing was enough to calm the shock waves the Chinese sent through other markets on Monday.
Overnight, US benchmark indexes lost up to 2% as concerns grew that the dive in the Chinese stocks was the start of another volatile period after last summer’s dramatic market rout.
“People think this is a manipulated, distorted market”, said Peter Lewis, the director of Peter Lewis Consulting.
The yuan’s depreciation should help China’s manufacturers because it makes their goods cheaper for foreign buyers.
The tempest in China’s markets has been felt around the world.
Jackson Wong, associate director at Huarong International Securities, attributed the trading halt to the mentality of Chinese investors.
In Europe, France’s CAC 40 was down 2.8 percent at 4,353.76 and Germany’s DAX slid 3.5 percent to 9,858.15.
That was 0.5 percent weaker than the day before and the biggest daily drop since last August, when an abrupt near 2 percent devaluation of the currency also roiled markets.
The market stampede on Thursday sparked growing criticism of the newly introduced circuit breaker mechanism which has been seen as a factor that magnified market volatilities.
The circuit breakers trip when there are big swings in the CSI 300 index. “Government-directed funds were buying up equities, and the fact that the market closed relatively flat despite that implies that individual investors were overwhelmingly selling”. The Shenzhen Composite Index for China’s smaller second exchange slumped 8.3 percent to 1,955.88.
Energy firms were among the worst hit after Brent oil prices fell 6% to its lowest finish since July 2004.
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Dupont’s shares were down 1.5 percent at $62.10 in premarket trading after Citigroup cut its rating on the Dow component to “neutral”. The contract on Thursday dropped $2. Trading halted only 13 minutes into the morning session.
