Global markets drop after Chinese stocks plunge 7 per cent

SEOUL, South Korea -- Chinese stocks plunged nearly 7 per cent Monday, triggering an emergency trading suspension and giving global markets an unnerving start to 2016.

See Full Article

Weak Chinese manufacturing and Middle East tensions were catalysts for the sell-off.

The Shanghai Composite Index dived 6.9 per cent to 3,296.66 on the first trading day of the year. The index was at its lowest level in nearly three months.

The official Xinhua News Agency said the Shanghai and Shenzhen stock markets halted trading for the remainder of Monday to avert steeper falls. It was the first time China used the "circuit breaker" mechanism it announced late last year.

In early European trading, Britain's FTSE 100 slipped 1.9 per cent to 6,123.91 and Germany's DAX tumbled 3.3 per cent to 10,389.11. France's CAC 40 slumped 2.1 per cent to 4,537.70. Futures augured losses on Wall Street. Dow futures fell 1.5 per cent and S&P 500 futures dropped 1.3 per cent.

Authorities have been trying for months to restore confidence in Chinese stocks after a plunge in prices in June rattled global markets and prompted a panicked, multibillion-dollar government intervention. Beijing is gradually unwinding emergency controls that included a freeze on new stock offerings.

Weak manufacturing data was behind the sell-off Monday along with Middle East tensions, which pushed up oil prices.

Huang Cengdong, an analyst for Sinolink Securities in Shanghai, said selling accelerated as investors tried to lock in trades before activity was halted.

He expects more selling in coming weeks ahead of corporate earnings reports.

"The market will not improve because there will be heavy selling in the near future," said Huang.

Elsewhere in Asia, Japan's Nikkei 225 tumbled 3.1 per cent to close at 18,450.98 and Hong Kong's Hang Seng retreated 2.7 per cent to 21,327.12. South Korea's Kospi closed 2.2 per cent lower at 1,918.76. Stocks in Australia, Taiwan and Southeast Asia were also lower.

The Caixin/Markit index of Chinese manufacturing, which is based on a survey of factory purchasing managers, fell to 48.2 in December from 48.6 the previous month, marking contraction for the 10th straight month.

It was the latest sign of the headwinds facing China's economy that add to a downbeat outlook for Asian exporters. On Friday, an official manufacturing index also showed a persistent contraction in factory activity despite Beijing's stimulus measures.

China's factory data is "still a long way off stirring up cheer about global demand recovery," said Mizuho Bank Ltd. in a daily commentary. "Asian exporters are expected to continue struggling with exports contraction and growth prospects dampened by related manufacturing gloom."

Escalating tensions in the Middle East pushed up the price of oil, analysts said.

Saudi Arabia said Sunday it is severing diplomatic relations with Iran, a development that could potentially threaten oil supply. The world's largest oil supplier executed a prominent Shiite cleric that prompted protesters to set fire to the Saudi Embassy in Tehran and Iran's top leader to criticize Saudi Arabia.

"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.

Benchmark U.S. crude added 14 cents to $37.19 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 36 cents to close at $37.04 per barrel on the last trading day of 2015. Brent crude, used to price international oils, rose 20 cents to $37.48 a barrel in London.

In currencies, the dollar weakened to 118.98 yen from 120.26 yen. The euro rose to $1.0914 from $1.0861.

-----

AP researcher Fu Ting in Shanghai contributed.



Advertisements

Latest Economic News

  • Strike averted as Purolator, Teamsters reach tentative agreement

    Economic CTV News
    MISSISSAUGA, Ont. - Purolator says it has reached a tentative contract agreement with Teamsters Canada ahead of today's strike deadline. The company says it is returning to normal operations and again accepting shipments after stopping them on Tuesday. Source
  • A 'hard Brexit' creates uncertainty for Canada on what's next for trade

    Economic CBC News
    As the United Kingdom triggers divorce negotiations with the European Union, Canadians are watching closely to see if this split can be amicable. If it's adversarial, and the Brexit terms are harsh, businesses may need to bail quickly or risk getting burned. Source
  • Asian stocks weak as investors weigh U.S. data, Brexit plans

    Economic CTV News
    HONG KONG -- Asian stocks were listless Wednesday as investors weighed strong U.S. economic reports against uncertainty as Britain readies a formal request to leave the European Union. KEEPING SCORE: Tokyo's benchmark Nikkei 225 index was less than 0.1 per cent lower at 19,194.20 while South Korea's Kospi was flat at 2,163.54. Source
  • Barrick, Goldcorp joining forces to work on projects in Chile

    Economic CTV News
    TORONTO - Two of Canada's biggest gold companies are creating a new joint venture to advance several mining projects clustered in northern Chile. The joint venture will be owned equally by Toronto-based Barrick Gold Corp. Source
  • What makes a cyberattack? Experts lobby to restrict the term

    Economic CTV News
    LONDON -- When U.S. senator John McCain told Ukrainian television that the allegedly Russian-backed breach of the Democratic National Committee's server was "an act of war," Michael Schmitt cringed. Schmitt, a professor of law at the U.S. Source
  • CEO of International Air Transport Association criticizes electronics device ban

    Economic CTV News
    MONTREAL -- The head of the International Air Transport Association says it's difficult to understand how banning electronic devices in carry-on baggage on flights will improve security. In a prepared text of a speech Tuesday, IATA CEO Alexandre de Juniac called on governments to work with the transport industry to ensure passengers aren't separated from their laptops, tablets and other devices. Source
  • Former Valeant CEO suing company over unpaid shares

    Economic CBC News
    Former Valeant Pharmaceuticals CEO Michael Pearson is suing his former employer for breach of contract for failing to deliver more than three million shares and consulting fees. In a lawsuit filed Monday in the U.S., Pearson alleges that Valeant breached his separation agreement by refusing to hand over 580,676 restricted share units and about 2.4 million performance share awards he was granted. Source
  • Cruise line stops port calls at Mexican resort of Acapulco

    Economic CTV News
    MEXICO CITY - The U.S. cruise ship line Holland America says it has halted port calls at Mexico's troubled resort city of Acapulco and will sail to other destinations in the country "due to recent security concerns. Source
  • Home Capital shares dive after company terminates CEO

    Economic CBC News
    Shares of Home Capital Group Inc. traded down more than seven per cent on the TSX on Tuesday, a day after the company said it had terminated its top executive. Home Capital announced Monday after stock markets had closed that that Martin Reid, its president and CEO, was out, effective immediately. Source
  • Elon Musk's latest venture: Brain-computer interfaces

    Economic CTV News
    NEW YORK -- Tech billionaire Elon Musk is announcing a new venture called Neuralink focused on linking brains to computers. The company plans to develop brain implants that can treat neural disorders and may one day be powerful enough to put humanity on a more even footing with future superintelligent computers, according to a Wall Street Journal report citing unnamed sources. Source