We will be watching this here at Equities as we begin trading for 2016.
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The first trading day of 2016 is off to a rocky start as some of the same worries that hurt stocks last year – slowing growth and wildly volatile markets in China and geopolitical angst in the Middle East – have reappeared at the start of the new year, prompting a global stock sell-off. The Shanghai Composite Index sank 6.9 percent while the CSI 300 Index plunged 7 percent, triggering the trading halt as new rules came into effect. The temporary freeze was prompted by a new automatic circuit-breaker system introduced previous year by Chinese regulators to limit volatility in times of crisis.
Investors fled to safe investments such as the USA dollar and yen, sending stocks and emerging-market currencies falling. The escalation of tension between Iran and Saudi Arabia will likely weigh on expectations. The attack came after the Saudis executed a prominent Shi’ite cleric on Saturday.
Futures on the Standard & Poor’s 500 Index slid 1.5 percent on Monday.
The broader Topix shed 2.4 percent to end the day at 1,509.67 with all but two of its 33 subindexes in negative territory.
The potential risks are reflected in the global market drop on Monday. “This isn’t a blip”.
The Footsie plunged on the first day of trading in the New Year, dragged lower by market turmoil in China.
Monday marks the worst start to the year for the S&P 500 since 2001 and the worst start for the Dow since 1932.
Still, Monday’s sell-off was a surprise and is leading some to wonder about continued growth in China as its manufacturing base appears to be shrinking more quickly than previously thought.
The euro zone’s blue-chip Euro STOXX 50 index declined by 2.6 percent.
In case the movement takes place on or after 2.30 pm, there is no trading halt.
He expects more selling in coming weeks ahead of corporate earnings reports.
Tokyo’s Nikkei index tumbled more than three per cent as a strong yen hit exporters, while Hong Kong was off 2.7 per cent and Seoul ended 2.2 per cent down.
The FTSE 100 Index slumped 148.8 points to 6093.4, or 2.4%, after Chinese stock markets were automatically suspended after falls of at least 7% following weak manufacturing data from the world’s second largest economy. Stocks in Taiwan and Southeast Asia were also lower. China is in the midst of a massive plan to shift its economy away from its traditional reliance on industry and exports toward consumer spending. On Friday, an official manufacturing index also showed a persistent contraction activity despite Beijing’s stimulus measures.
Adding to the jitters today are Middle East tensions, which pushed up oil prices. Saudi has cut diplomatic ties with Iran and given diplomats 48 hours to leave. “Oil markets will be concerned that this could be an incremental step in a deteriorating political situation that might ultimately threaten world oil supply”, Ric Spooner, chief analyst at CMC Markets, said in a commentary.
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Brenda Kelly, head analyst at London Capital Group, pointed out that the London market has followed the adage “As goes January, so goes the year” for 62 out of the last 85 years.
