APPHOTO XAW104: An investor places her leg on a bench near an electronic board displaying stock prices at a brokerage house in Beijing, Monday, Jan. 4, 2016. Dow futures were down 1.7 percent, while S&P 500 futures shed 1.8 percent, The Associated Press reported.
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The Toronto Stock Exchange’s S&P/TSX composite index dropped 175.92 points or 1.35 per cent to 12,834.03 in the first minutes of trading Monday.
Authorities in China have, for the first time, closed stock exchanges in Shanghai and Shenzhen markets early after shares fell seven percent, triggering sell-off elsewhere in Asia.
The trading halt marked China’s first ever use of the circuit-breaker mechanism, under which a 5% move in either direction from the CSI 300 index’s previous close sparks a 15-minute trade suspension across China’s stock indexes if it occurs before 1445 local time.
Share markets fell, while oil and gold prices rose, as rising tensions in the Middle East and more poor Chinese economic data spooked investors. Britain’s FTSE 100 fell 2.4 percent to 6,090.76 while France’s CAC 40 dropped 2.7 percent to 4,514.03. The yield on the 10-year Treasury note fell to 2.21 percent from 2.27 percent.
But analysts said the “circuit breaker” risked interfering with market efficiency and could even prove counter-productive, heightening volatility instead of reducing it. In the United Kingdom there was less good news for manufacturing as Markit’s gauge unexpectedly dropped to 51.9, a three month low. Any number below 50 represents a deceleration in the factory sector.
Oil firms were also lower in the wake of Saudi Arabia cutting diplomatic ties with Iran, two of the world’s biggest oil producers. There’s also the unexpected sharpening of tensions between Iran and Saudi Arabia over the weekend, following Saudi Arabia’s execution of a Shia cleric.
China’s stock indices plummeted in mid-2015 as a debt-fuelled bubble burst, sending ripples through global exchanges and wiping trillions from market capitalizations. Oil prices rose on the news.
US-traded Chinese stocks were in retreat, including Alibaba and Baidu, which sank 5.8 percent and 3.9 percent.
Int he banking sector, JPMorgan Chase lost 3.3 percent and Bank of America 2.7 percent.
Tensions in the Middle East lifted prices of U.S.-produced crude up 37 cents, or 1%, to $37.41 per barrel. “What happened with today’s P.M.I., you can pin it on that news, but we think this year’s equities will go through these phases”.
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European markets all fell in early trading. Shares of Netflix plunged 7% after the streaming site was downgraded by analysts at Robert W. Baird due to concerns about US subscriber growth. The Caixin index is a nongovernmental survey of smaller businesses in China; the government index, which focuses on larger companies and was released on Friday, also showed a continued contraction.
