United States stocks tumbled more than two percent early Monday, joining a global sell-off sparked by a seven percent plunge in the Shanghai stock market.
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170-r-13-(Sound of the opening bell at the New York Stock exchange, at the start of today’s trading)-Sound of the opening bell at the New York Stock exchange at the start of today’s trading.
“On the first trading day of 2016, the markets have got off to a shocking start”, added analyst Manoj Ladwa at brokerage TJM Partners. It was the first time China used the “circuit breaker” mechanism it announced late past year. Beijing is gradually unwinding emergency controls that included a freeze on new stock offerings.
Apart from the concerns regarding China led global growth slowdown, global investors also fears that the current stand-off between Iran and Saudi Arabia would escalate the sectarian conflicts in the Middle East, which has injected an element of uncertainty in the global oil market. The Dow Jones Industrial Average lost 401.66 points, or 2.3 percent, to 17,023.83. The Shenzhen Composite, often compared to America’s Nasdaq index because it has more tech companies, nosedived more than 8 percent.
The rough start to 2016 could be a bad omen for Wall Street, which has an old saying: “As January goes, so goes the year”. “This isn’t a blip”.
Losses in Europe as well as the US mirrored the move of the broadest index of shares in Asia outside that of Japan, the MSCI, which posted its largest loss since August of previous year.
Huang Cengdong, an analyst for Sinolink Securities in Shanghai, said selling accelerated as investors tried to lock in trades before trading was halted. He expects more selling in coming weeks ahead of corporate earnings reports.
Other Asian markets also fell, while in Europe, the FTSE 100 closed down 2.6% and Germany’s Dax index dropped 4.3%.
Falling prices attract more people to dump their stocks, and although shares are still above their lows, authorities will be keen to avoid the kind of share market crash we saw last summer.
China’s yuan currency hit its lowest in more than four years after the central bank lowered its guidance rate and factory activity contracted for a 10th straight month in December, at a sharper pace than in November. “And China has only added to the negative sentiment as their economy shows further signs of slowing”, he told AFP.
A report showed that the Chinese manufacturing sector continued to contract as businesses faced weak demand. Following angry protests over Saudi Arabia’s execution Saturday of prominent Shiite cleric and activist Sheikh Nimr al-Nimr, Saudi Arabia and then Bahrain and Sudan severed relations with Iran, the main Shiite power.
The Canadian dollar traded at 71.61 cents US, down 0.64 of a cent from Thursday’s close before the New Year holiday. Oil was down 30 cents to $36.70 a barrel in New York Mercantile Exchange.
“We have not seen such volatility on the first trading day for the past 11 years”, said Hong Hao, chief strategist at Bocom International.
In other markets, Brent crude oil prices were volatile.
In metals trading, gold rose $15 to $1,075.20 an ounce, silver lost 4 cents to $13.84 an ounce and copper fell six cents to $2.08 a pound.
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Last year, steep declines in Chinese stocks were periodically followed by dramatic, if less severe, declines in USA and European stocks.
