(AP Photo/Mark Schiefelbein). Chinese investors use a computer terminal to check stock prices in a brokerage house in Beijing, Friday, Jan. 8, 2016.
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Trading in Chinese stocks was suspended Thursday after a key index plunged 7 percent.
Specialist Jarret Johnson, foreground, works on the floor of the New York Stock Exchange on Thursday.
The benchmark Shanghai Composite Index tumbled 7.3 percent to 3,115.89 before new “circuit breakers” suspended trading for the day.
The sell-off spread across continents, sending indexes sharply lower in the US and Europe. Mutual fund managers say China’s actual economic growth could be closer to 4 percent.
He said the mechanism “is not the major reason for the market plunge, but it failed to achieve the anticipated effects”, adding that the mechanism in effect accelerated the plunge as some investors chose to sell when the index’s drop neared 5 percent or 7 percent. The Nasdaq has fallen six days straight.
The circuit breakers also kicked in Monday, the first day of trading since they were introduced on January 1. Those halts, which were triggered twice this week, are increasingly seen as inadequate for preventing volatility.
The Dow Jones industrial average dropped 252.15 points, or 1.5 percent, to 16,906.51. The Shenzhen Composite Index for China’s second smaller stock exchange slumped 8.3 percent to 1,955.88.
The Shanghai Composite Index (Sha:000001) finished down 7.04% at 3,125, bringing its losses over just four trading days to 11.7%.
While the Nasdaq is so far the only major USA index to enter a correction, the other two are getting close.
“These include the resumption of fears over global growth following weak data from China… while increased geopolitical tensions between Saudi Arabia and Iran and an unexpected nuclear test from North Korea have also encouraged investors to dodge away from riskier assets”. Urban Outfitters climbed 79 cents, or 3.6 percent, to $22.71. Technology company and retailers made the largest advances.
That volatility shook European and U.S. markets early Thursday.
Shanghai’s main index closed up two percent but lost about one-tenth of its value over the week.
During the first week of 2016, China stocks lost roughly 10 percent in what was their worst weekly performance since the market crashed in August a year ago. Investors are also unnerved that Beijing has allowed the yuan currency to weaken, a possible sign the economy is in worse shape than thought. Foreign investors have little direct involvement in Chinese financial markets, but the size of China’s economy means the wild gyrations are a source of concern internationally. After all, the country’s official unemployment has been basically unchanged for years.
Microsoft was the biggest loser on the Dow, and Apple, the world’s largest publicly traded company, is trading at its lowest price since October 2014.
On Friday, PBOC set the daily reference rate at 6.5636 to the greenback, up 0.02 percent from Thursday, when it was set at its lowest level in almost five years. Analysts said the market was likely being supported by buying from Chinese government entities that have been dubbed the “National Team”.
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In other energy trading, wholesale gasoline declined 1.6 cents to $1.146 a gallon and heating oil lost 1.5 cents to $1.066 a gallon. Silver rose 36.8 cents, or 2.6 percent, to $14.344 an ounce.
