China shares in dramatic swings as officials lift ‘circuit breaker’

Stocks went into free-fall until the Chinese government abruptly halted trading using a “circuit breaker” system, which stops trading completely if there is a 7 percent decline in the Shanghai and Shenzhen CSI 300 Index. The “circuit breaker” functions by automatically suspending trading for 15 minutes if shares fell by five percent in one day, and closing them for an entire day if they dropped seven percent or more.

(AP Photo/Eugene Hoshiko). A woman is reflected on an electronic stock board of a securities firm in Tokyo, Thursday, Jan. 7, 2016.

The latest trigger was currency jitters, but Thursday’s plunge in Chinese stocks was just one in a series of aftershocks from last year’s boom and bust that could shake markets for months to come.

World Bank has predicted that the global economy will sputter along this year as China’s slowdown prolongs a commodity slump.

The Standard & Poor’s 500 index lost 24 points, or 1.2 percent, to 1,966. The Nasdaq composite index dropped 146.34 points, or 3 percent, to 4,689.43.

Oil and gas companies again fell more than the rest of the market as energy prices continued to plunge.

The stock market fallout on Thursday has sparked criticism about the newly introduced circuit breaker mechanism with some investors and analysts calling for further improvements.

China’s tumbling stock prices are, in themselves, nothing for investors outside the country to panic over. “For risk assets to stabilize and sentiment to turn around, we are going to need a stable or even positive move in the Chinese currency”.

The blue-chip composite CSI 300 was up by 2.04 per cent on Friday, but the overall decline during the week was steep. That summer, a rise in investor confidence caused the market to eventually become oversaturated.

Markets around the world are edging higher Friday after China stocks closed up, and as investors turn their attention to the U.S.jobs report.

“It’s been hard to catch a breath in 2016 and traders haven’t really known which way to turn”, Chris Weston, chief market strategist in Melbourne at IG Ltd., told AFP.

China says its economy is growing at close to 7 per cent, but many investors don’t trust the government’s numbers and believe that figure is inflated. The benchmark US contract rebounded moderately in Asian daytime hours, rising 42 cents to $33.69 in electronic trading on the New York Mercantile Exchange. The Chinese currency began a steeper slide at the end of 2015, as dollars gained new appeal in December when the U.S. Federal Reserve raised interest rates for the first time in nine and a half years. Citigroup gave up $2.56, or 5.1 percent, to $47.56. Silver rose 36.8 cents, or 2.6 percent, to $14.344 an ounce. The euro rose to $1.0825 from $1.0778.

Bonds prices rose. The yield on 10-year Treasury bond fell to 2.15 percent from 2.17 percent.