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

  • Why do you need a pet insurance, right here, right now

    Economic 24news
    Many Canadians would consider their pets as a part of their immediate, granular, family. Although some professionals think it’s not healthy, that’s the way life is in the twenty first century; There is a steep decline in the birth rate globally, with Japan leading the pack, and pets are filling in the void.
  • 'Archaic' liquor laws in B.C. hurt consumers, whisky distributor says

    Economic CTV News
    VANCOUVER -- An Alberta-based whisky distributor says "archaic" liquor policies in British Columbia are limiting the range of products consumers can access. Robert Carpenter with the Scotch Malt Whisky Society says B.C. bars have long skirted rules that prevent them from buying unique products at private liquor stores that aren't carried at government stores. Source
  • With a deep tech talent pool, Toronto could hit Amazon's 'sweet spot' with bid for new HQ

    Economic CBC News
    Toronto faces stiff competition in its bid to court Amazon, but some Canadian tech experts agree that among the 20 cities short-listed as potential locations for the company's second headquarters, Toronto might just hit "the sweet spot. Source
  • HBC's Lord & Taylor to lay off 200 in U.S. operations move

    Economic CTV News
    WILKES-BARRE, Pa. -- Lord & Taylor has announced that it will be laying off about 200 people at a Pennsylvania distribution centre as it moves some operations to a new location about 80 kilometres away. Source
  • Four things to watch for in the Canadian business world in the coming week

    Economic CTV News
    TORONTO -- Four things to watch for in the Canadian business world in the coming week: Time to have "the talk"? Alimentation Couche-Tard's hosts its first-ever investor day on Monday. The large convenience store chain, which operates as Circle K outside Quebec, recently said it hasn't given up hope of selling cannabis as some Western Canadian provinces turn to the private sector for over-the-counter sales. Source
  • Canadian tech CEOs disappointed Amazon won't be coming to their cities

    Economic CTV News
    CALGARY -- Tech sector entrepreneurs whose Canadian cities were snubbed by Amazon in its search for a second corporate campus say they are disappointed, despite fears they would have seen increased competition for scarce skilled talent. Source
  • Rogers sales tactics and the 'Tide pod challenge': CBC's Marketplace consumer cheat sheet

    Economic CBC News
    Miss something this week? Don't panic. CBC's Marketplace rounds up the consumer and health news you need. Want this in your inbox? Get the Marketplace newsletter every Friday. Rogers employees reveal sales pressures A number of Rogers employees have come forward about how they are coached to upsell customers. Source
  • Macron says U.K. can't keep full access to E.U. post-Brexit

    Economic CTV News
    LONDON -- French President Emmanuel Macron has suggested that Britain is likely to negotiate a unique relationship with the European Union before it leaves the bloc next year, while stressing that any agreement must be consistent with EU rules. Source
  • Retrofitting suburbia: Old shopping malls can be saved by their parking lots

    Economic CBC News
    Aging shopping centres, built decades ago as beacons of fashion and free parking on the suburban fringe, are gradually becoming relics on a sea of inner-city asphalt. But rather than tinker at the margins to squeeze the last nickels out of old stores, some retailers are doing something dramatic with their biggest asset: land. Source
  • Want to understand the problems with minimum wage? Talk to people who earn it

    Economic CBC News
    There are more than a million Canadians who work minimum wage jobs — they make up 8 per cent of the country's salaried employees. The hourly rate they earn varies across the country, from a low of $10.85 in Nova Scotia, to Alberta where the minimum wage is set to increase to $15 in October 2018. Source