Global stocks slump as investors worry about North Korea bomb test

HONG KONG - World stock markets mostly slumped Wednesday after a North Korean nuclear test unnerved investors and a report showing weakness in China's service industries renewed worries about growth in the world's No.

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2 economy.

KEEPING SCORE: European stocks fell in early trading. France's CAC 40 was down 0.6 per cent to 4,509.41 and Germany's DAX shed 0.6 per cent to 10,247.44. Britain's FTSE 100 lost 0.7 per cent to 6,094.83. U.S stocks were poised to open lower. Dow futures dropped 0.9 per cent to 16,924.00. Broader S&P 500 futures slumped 1.1 per cent to 1,990.30.

NUCLEAR TEST: North Korea announced it had carried out a hydrogen bomb test, after South Korea detected an "artificial earthquake" near the North's main nuclear test site. The test is likely to raise tensions in the region and make investors more cautious and less willing to place risky bets. The surprise announcement makes it tougher to curb North Korea's longstanding efforts to establish an arsenal of nuclear-armed long-distance missiles.

SERVICE SLIDE: A monthly survey of China's service industries slipped to a 17-month low, renewing fears among investors that the world's No. 2 economy was facing stronger headwinds. The Caixin/Markit survey of service industry purchasing managers slipped to 50.2 in December from 51.2 the previous month. The index is based on a 100-point scale with numbers above 50 indicating expansion. Service industries have helped offset weakness in trade and investment as China's economy undergoes a painful slowdown, but the latest figures show momentum is slowing.

QUOTEWORTHY: "I didn't expect 2016 to be anything other than a roller-coaster, but we're really starting off the roller-coaster really early," said Michael Every, head of Asia-Pacific financial market research at Rabobank. The poor Caixin reading and a weakening yuan that hurts China's export rivals were bad enough, but now "you have North Korea letting off a hydrogen bomb, not just a nuclear test, but a stronger nuclear bomb," he said. "You wonder how much worse things could get."

CHINA MEASURES: Stocks in China rebounded on news that Beijing would keep market steadying measures in place. The China Securities Regulatory Commission said that when a six-month old ban on sales by large shareholders ends this week, new restrictions will take effect. Stockholders owning more than 5 per cent of a company will be required to sell their shares in private transactions rather than on the open market to avoid shocks to the market, the regulator said.

ASIAN SCORECARD: Most regional benchmarks closed lower. Japan's Nikkei 225 index lost 1 per cent to close at 18,191.32 and South Korea's Kospi fell 0.3 per cent to end at 1,925.43. Hong Kong's Hang Seng shed 1 per cent to 20,980.81 but the Shanghai Composite Index in mainland China rebounded 2.3 per cent to 3,361.84. It slumped 6.9 per cent on Monday and 0.3 per cent on Tuesday. Australia's S&P/ASX 200 retreated 1.2 per cent to 5,123.10.

ENERGY: Crude futures gave up their early gains, with benchmark U.S. oil falling 53 cents to $35.44 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 79 cents, or 2.1 per cent, to settle at $35.97 a barrel on Thursday as demand appeared to weaken because of large global stockpiles. Brent crude, a benchmark for international oils, lost 72 cents to $35.69 a barrel in London.

CURRENCIES: The dollar slipped to 118.52 yen from 119.13 yen in the previous day's trading. The euro weakened to $1.0730 from $1.0744.



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