Stocks fall on China worries; Dow loses 1

A 7 percent drop in Chinese shares on Monday halted trading in Shanghai and dragged down stock markets around the world, as investors began 2016 with fresh worries over global growth and sought the safety of bonds and gold. The Dow slumped 276.09 points or 1.6% to 17,148.94, the Nasdaq plummeted 104.32 points or 2.1% to 4,903.09 and the S&P 500 tumbled 31.28 points or 1.5% to 2,012.66.

US stocks slumped Monday, the first trading day of 2016, as heavy sell-offs in global markets and geopolitical tensions between Iran and Saudi Arabia rattled nervous investors. Middle East tensions, which briefly pushed up oil prices, added to the angst on Wall Street. At its low for the day, the Dow was down 467 points and was headed for its worst first-day percentage drop since 1932.

Declining issues outnumbered advancing ones on the NYSE by 2,127 to 977, for a 2.18-to-1 ratio on the downside; on the Nasdaq, 2,202 issues fell and 652 advanced for a 3.38-to-1 ratio favoring decliners. Japan’s Nikkei Stock Average lost 3.1% and Hong Kong’s Hang Seng Index fell 2.7%.

If you’re looking for a reason to be scared of stocks in 2016, look no further than China. “That’s just the world we live in now”, said Joseph Quinlan, chief market strategist at U.S. Trust, Bank of America’s private wealth arm.

The drop was caused by weak Chinese manufacturing data and escalating tensions in the Middle East. But analysts and investors say the circuit breaker could trigger more selling, as the freeze spooks investors and losses snowball, setting off the halt all over again. During the depths of a China stock market crash last summer, major Asian indexes plunged some 40% before officials stepped in. He added, “It’s going to be a turbulent year”. Saudi Arabia said Sunday it is severing diplomatic relations with Iran, a development that could potentially threaten oil supply.

It took no time at all for fears about China’s economic slowdown and market gyrations there to put US investors in a bad mood this year.

After disappointing manufacturing data in China, the Shanghai composite crashed 6.9 percent Monday, its worst daily return since the turmoil last August. With the loss, the index has fallen to its lowest intraday level in over three months.

Benchmark U.S. crude gave up an early gain and was down slightly in midday trading in NY. The DAX index in Germany, whose export-led economy is sensitive to the fortunes of China, tumbled 4.3 percent. The Dow, the S&P 500, and the Nasdaq were all lower by more than 2% shortly after the open. U.S.-listed Shire shares (SHPG) were down. Yields on triple-A rated German 10-year Bunds falling 6 basis points to 0.57 percent.