Stocks sink as oil price plunges and China worries return

Thursday’s sell-off affected almost all stocks except for the gold sector and airline operator Qantas, with energy and mining stocks hit the hardest.

China’s stock market slipped about seven percent yesterday after the yuan fell to its lowest level against the dollar since March 2011.

China could be in store for more declines after the communist state’s market regulator suspended automatic trading halts that were put in place January 1. The Nasdaq composite index fell 78 points, or 1.6 percent, to 4,755.

USA stocks stumbled on Wednesday as investors were unnerved by another steep drop in the price of oil, more signs of weakness in China and claims from the reclusive government of North Korea that it had successfully tested a powerful nuclear weapon.

The Dow Jones industrial average skidded 366 points, or 2.2 per cent, to 16,540.

Tokyo sank one percent as exporters were hurt by a strong yen, Hong Kong lost one percent, Sydney shed 1.2 percent and Taipei dropped 1.1 percent. Futures augured sharp losses in the U.S.: Dow and S&P 500 futures were each down 2.3 percent. Its shares dipped 1.7 percent and touched their lowest price since October 2014.

Energy stocks fell with those prices. Aerospace company Boeing lost $45.76, or 4.2 percent, to $113.07 and railroad operator Union Pacific shed $1.47, or 2 percent, to $73.36.

Other global markets also lost ground. The Nasdaq composite index fell 69 point, or 1.4 percent, to 4,766.

Chinese government measures introduced past year to prop up share prices after a meltdown in June are being gradually withdrawn, leading to volatile trading.

Investors fear that the scale of the yuan’s depreciation could mean that the slowdown in China’s economic growth is even worse than previously thought.

The Chinese government’s decision to allow its currency to weaken against the dollar is a reflection of sluggishness in the country’s giant economy.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: “With the Chinese deciding that the idea of a circuit breaker is broken, withdrawing the facility after just four days with it having been triggered twice, some stability returned to Asian markets overnight and London in turn”.

“The big influence continues to be concerns about what’s going on in China”, said Stephen Massocca, chief investment officer at Wedbush Equity Management LLC in San Francisco. Experts said it was used to shore up stocks to avert a repeat of last summer’s rout that saw trillions of dollars wiped off valuations.

US and European companies have rushed to sell cars and a multitude of other products to China’s fast-growing middle class. China accounted for more than half of Apple’s revenue growth in the fiscal year that ended in September. Britain’s FTSE 100 sank 2.7 percent to 5,908.35. Natural gas declined 5.6 cents, or 2.5 percent, to $2.267 per 1,000 cubic feet. Copper producer Freeport-McMoRan lost 61 cents, or 9.9 percent, to $5.56. On Monday, stocks tumbled more than 3 percent before recovering, then declined again on Wednesday. Hotel group Dalata finished 1.3 per cent higher at €5.257 after experiencing sell offs in the previous couple of days.

Homebuilder KB Home slumped after its fourth-quarter results fell short of Wall Street estimates. The smaller Shenzhen Composite Index slumped 8.3 per cent to 1,955.88.

One of the few risers was retailer Marks & Spencer, which said its boss Marc Bolland will retire in April after six years at the helm as it posted a dire Christmas performance from its womenswear division.

In currency markets, the euro fell to $1.0872 from $1.0917 on Thursday.