The Dow Jones industrial average was down 432.27 points, or 2.48 per cent, at 16,992.76, set for its worst day in four months. After sinking in the first half-hour of trading as gloomy China data triggered a 6.9% dive on the Shanghai composite, disappointing USA factory activity pushed stocks lower still. It was the first time China had used the “circuit breaker” mechanism. A few of the clouds sitting over the market: the Federal Reserve began raising interest rates for the first time in almost a decade last month, public offerings of new stocks slowed to a trickle, and tech companies are continuing to command eye-popping valuations.
Global stock markets fell Monday as worries over China’s economy and instability in the Middle East combined to scare investors.
“On the first trading day of 2016, the markets have got off to a shocking start”, added analyst Manoj Ladwa at brokerage TJM Partners. “This isn’t a blip”. An earlier 15-minute suspension at the 5 percent level failed to stop the retreat, with shares extending losses as soon as the market re-opened. Dow futures were down 1.7 percent, while S&P 500 futures shed 1.8 percent, The Associated Press reported.
Analysts said selling in Chinese markets was also driven by other factors, including the scheduled lifting of bans on IPOs and sales by larger investors.
A report showing a further decline in manufacturing, a huge sector that has fueled China’s economic surge in past years, prompted investors to sell on Monday.
Measures to help steady stocks that were put in place after last year’s market turmoil are exacerbating the sell-off in China.
The Nikkei in Japan and Hong Kong’s Hang Seng closed down 3.0% and 2.7%, respectively.
In the USA, investors were also anxious about data suggesting that slow overseas growth and low oil prices are continuing to hurt US manufacturers.
Figures released earlier on 4 January showed the Caixin/Markit manufacturing purchasing managers’ index (PMI) fell to 48.2 in December 2015, marking the 10th consecutive month the index has remained below the 50 threshold that indicates expansion.
USA manufacturers contracted in December at the fastest pace in more than six years as factories cut jobs and new orders shrank.
Bond prices rose. The yield on the 10-year Treasury note fell to 2.23 percent.
Oil prices soared 87 cents a barrel to $37.91 U.S.
Global markets were also lower after Saudi Arabia severed diplomatic relations with Iran on Sunday.
Adding to the jitters today are Middle East tensions, which pushed up oil prices.
All 10 major S&P sectors were lower on Monday, led by a 2.52 per cent decline in financials. Asian stock markets started 2016 on a weak note Monday. Like past year, any signs of a more pronounced economic slowdown in China is a risk to global stocks, including USA shares, Wall Street pundits noted in their 2016 forecasts.
Brent rose 3.94% to $38.75 a barrel and US West Texas Intermediate (WTI) futures rose 2.83% to $38.09 a barrel.
The Canadian dollar inched down 0.17 cents to 72.01 cents U.S.
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