Asian stocks tentative day after China plunge
Volatility shook Chinese stock markets Tuesday, as the Shanghai index dropped more than three percent on concerns over slowing growth before erasing most of the losses, a day after authorities halted trading to arrest falling prices.
Trading on China’s stock market was suspended completely after share prices plunged more than 7 percent, even after regulators enacted the circuit breaker systems to calm investors.
The trading halt was China’s first-ever use of circuit breakers – a kind of emergency brake – on main exchanges. Frankfurt posted a diving of 4.3 percent, while Milan lost 3.2 percent, and Paris, 2.5 percent.
The Dow Jones industrial average clawed back from a steep early decline but still ended the day down 1.6 percent, its biggest drop in two weeks.
“Investors feared that they wouldn’t be able to sell once the circuit breaker was turned on, ” Luan Shaofei, a money manager at Changan Fund Management Co., said from Shanghai. US stocks are opening 2016 on a grim note, dropping sharply after a plunge in China and declines in Europe.
It slumped 6.9 percent on Monday, the first trading day of 2016. That followed a 7 percent dive on Monday and only added to the market’s reputation for wild moves.
Chris Beauchamp, an IG analyst, said: “Early optimism on the London market has faded as investors continue to fret about the situation in Chinese markets”.
While a slowdown in China has some impact on the US because American companies like Apple sell products there, the vast majority of the USA economy is made up of Americans buying things at home.
Gilead Sciences Inc. (GILD) inched 0.2% lower ahead of the bell after the drugmaker late Monday said the U.S. Food and Drug Administration granted a priority review (http://www.marketwatch.com/story/gilead-gets-fda-priority-review-of- hepatitis-c-combo-drug-2016-01-04-181034922) of its experimental hepatitis C combination drug.
Relte Stephen Schutte, analyst for Markit cites the negative PMI data, combined with an end to a six month ban on selling by major investors as factors that sparked a “new year” equity sell off, which triggered China’s newly-installed circuit breaker for stocks.
Fresh political tensions between Saudi Arabia and Iran left traders questioning the outlook for oil prices.
In a meeting with leaders from the country’s financial sector in Seoul, Finance Minister Choi Kyung-hwan pointed out Monday’s crash and mounting geopolitical uncertainties in the Middle East are heightening concerns across the board. Southwestern Energy climbed 21 cents, also 3 percent, to $7.31 and Consol Energy rose 6 cents, or 1 percent, to $7.96.
Brent for February delivery was quoted 5 cents firmer at $37.33 a barrel, while USA crude added 13 cents to $36.89.
SEOUL – The leader of South Korea’s second-largest umbrella labor union has been indicted on charges of leading last year’s violent rallies in downtown Seoul, prosecutors said Tuesday.
Last year, the loonie was stripped of almost 14 cents of its value against the USA dollar, making it the worst performing of the G10 currencies, according to a report from TD Securities.