Global stocks begin 2016 with China growth hangover

NEW YORK, United States — Fresh evidence of China’s economic slowdown sent world stock markets tumbling on Monday, with Europe and the United States following Asia sharply lower in a gloomy start to 2016.

Shanghai equities plunged seven percent, leading an Asian retreat, as more weak factory data fanned fears about the health of the world’s second-biggest economy.

BACKSTORY: China stock markets fall 7%; trading stopped Monday | Global stocks sink after China index dives 7 percent

In Europe, Frankfurt posted the heaviest losses, diving 4.3 percent. Milan slumped 3.2 percent and Paris shed 2.5 percent.

London stocks lost 2.4 percent, with China-exposed mining companies falling the heaviest.

Wall Street joined the sell-off, with the S&P 500 falling 1.5 percent.

“It hasn’t been a textbook start for 2016. It’s in fact been one of the worst first trading days on record,” said market analyst Jasper Lawler at CMC Markets UK.

“Markets have been swept up in a renewed fear that China’s economic slowdown is picking up speed after surprisingly weak manufacturing data,” he added.

BACKSTORY: China manufacturing worsens in December — survey

The sell-off came as financial markets reopened after Friday’s new year holiday.

London’s top fallers were mining giants Anglo American, which tanked 7.2 percent, and Glencore which dropped 5.8 percent, on demand fears in leading commodity consumer China.

In the US, some of the biggest equity winners from 2015 fell hard in a decline analysts attributed to profit taking. Amazon tumbled 5.8 percent, Netflix 3.9 percent and Priceline, Facebook and Google parent Alphabet all lost about 2.3 percent.

Global markets were also spooked over the flare-up in tensions between Iran and Saudi Arabia. Following angry protests over Saudi Arabia’s execution Saturday of prominent Shiite cleric and activist Sheikh Nimr al-Nimr, Saudi Arabia and then Bahrain and Sudan severed relations with Iran, the main Shiite power.

Oil prices initially gained on the Saudi-Iran rift, but fizzled as traders returned to focus on the prolonged global supply glut and the weak China data.

‘Shocking start’

“On the first trading day of 2016, the markets have got off to a shocking start,” said analyst Manoj Ladwa at brokerage TJM Partners.

“The problems in the Middle East have taken a turn for the worse with the Saudi-Iran stand-off. And China has only added to the negative sentiment as their economy shows further signs of slowing,” he told AFP.

Authorities in China suspended trading on its stock markets in the early afternoon after shares collapsed.

The drop in the CSI300 index — which covers the Shanghai and Shenzhen bourses — for the first time triggered an automatic early closure under a “circuit breaker” mechanism to curb volatility, after an earlier 15-minute trading halt had failed to stem the declines.

The sharp losses revived memories of the summer rout that saw Shanghai crash about 40 percent and trillions of dollars wiped off valuations.

“This situation has gotten the market off to a very ugly start,” said Peter Cardillo, chief market economist at First Standard Financial.

– Key figures around 2200 GMT

New York – Dow: DOWN 1.6 percent at 17,148.94 (close)

New York – S&P 500: DOWN 1.5 percent at 2,012.66 (close)

New York – Nasdaq: DOWN 2.1 percent at 4,903.09 (close)

London – FTSE 100: DOWN 2.4 percent at 6,093.43 points (close)

Paris – CAC 40: DOWN 2.5 percent at 4,522.45 (close)

Frankfurt – DAX 30: DOWN 4.3 percent at 10,283.44 (close)

EURO STOXX 50: DOWN 3.1 percent at 3,164.76 (close)

Shanghai – composite: DOWN 6.9 percent at 3,296.26 (close)

Shenzhen – composite: DOWN 8.2 percent at 2,119.16 (close)

Tokyo – Nikkei 225: DOWN 3.1 percent at 18,450.98 (close)

Euro/dollar: DOWN to $1.0833 from $1.0855 Thursday

Dollar/yen:  DOWN to 119.42 yen from 120.27 yen Thursday