Global stocks sink after China index dives 7 percent

The Shanghai Composite Index has fallen to its lowest level in almost three months, on what was the first trading day of 2016.

The Dow was down by more than 400 points about a half-hour into the trading day.

A man is reflected on a monitor screen displaying stock index at a brokerage house in Handan in north China’s Hebei province, Monday, Jan. 4, 2016.

BEIJING (AP) – China’s stock market lurched lower again Monday, triggering “circuit breakers” that halted trading.

The Dow Jones industrial average sank 347 points, or 2 percent, to 17,078 as of 9:35 a.m. Eastern time (6:35 a.m. Pacific) Monday. In the US, the Standard and Poor’s 500 index lost 2.6 percent in morning trading.

The Saudi Tadaul All-Shares Index dipped 2.36 percent to finish on 6,788.13 points with all the 15 sectors dropping.

If the index falls further to 7 per cent, the markets are closed for the rest of the day.

The trading halt was China’s first-ever use of circuit breakers – a kind of emergency brake – on its main exchanges.

“The execution raises uncertainty about the oil price, with concerns and tensions in the Middle East, and that will be a real driving force”. Brent crude, used to price global oils, rose 85 cents to $38.12 a barrel in London.

EUROPE DROPS: The DAX index in Germany, whose export-led economy is sensitive to the fortunes of China, tumbled 4.2 per cent. Britain’s FTSE 100 fell 2.1 per cent while France’s CAC 40 dropped 2.4 per cent.

An immediate focus will be on Monday’s ISM survey on U.S. manufacturing, which is expected to show the sector is still in contraction after hitting a six-and-a-half-year low in November. Saudi Arabia announced Sunday that it was severing ties with Iran, hours after Iranian protesters set fires in the Saudi Embassy compound in Tehran.

Elsewhere in Asia, Japan’s Nikkei 225 tumbled 3.1 percent and Hong Kong’s Hang Seng retreated 2.7 percent.

Adding to the worries in the world’s financial markets is rising tensions between Saudi Arabia and Iran.

Benchmark U.S. crude added 22 cents to $37.26 per barrel in electronic trading on the New York Mercantile Exchange. The cautious mood towards riskier assets helped the Japanese yen, with the dollar falling below ¥119 for the first time since mid-October. Oil prices rose on the news.

Stocks plunged on Monday as investors sought to dump shares to ward off potential volatilities.

It was also the worst start to a trading year for the index, an ominous sign for what may arrive in the year ahead.

In the currency market, the safe-haven Swiss franc was bid up, gaining 0.4 percent against the euro to 1.0849 per euro EURCHF=EBS.