Stock markets start 2016 with sharp drop

TORONTO -- Stock markets around the world got off to a bad start in the first day of trading for 2016, sparked by a sharp drop in China that triggered a new "circuit breaker" mechanism that closed trading early to limit losses.

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The Toronto Stock Exchange's S&P/TSX composite index was down 198.15 points or 1.52 per cent after an hour of trading, taking the index to 12,811.80 at midmorning.

In New York, the Dow Jones average was down 355.02 points or 2.04 per cent at 17,070.01, the broader S&P 500 index declined 40.36 points or nearly two per cent per cent to 2,003.58 and the Nasdaq lost 128.386 points or 2.80 per cent to 4,464.88.

The plunge began on the Shanghai index, which dived 6.9 per cent to 3,296.66 before the market was closed early to avert steeper falls. It was the first day of operation for a the new "circuit breaker" mechanism.

The Shanghai market's decline followed weak reports on its manufacturing sector, which appeared to contract in December for the 10th straight month, according to a private-sector survey of purchasing managers.

The Caixin/Markit index fell to 48.2 in December from 48.6 the previous month. Numbers below 50 indicate contraction.

The Canadian dollar traded at 71.99 cents U.S., down 0.26 of a cent from Thursday's close before the New Year holiday.

The February crude contract was up 78 cents at US$37.82 per barrel and the January contract for natural gas was down two cents at US$2.32.

The price of oil was partially helped by fresh political tensions in the Middle East. Saudi Arabia's execution of a Shiite cleric, along with 46 others on Saturday, sparked official outrage and protest in Iran and several other countries.

The February gold contract was up $18.40 to US$1,078.60 an ounce. Gold is often seen as a safe haven in times of political or economic uncertainty.


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