Stocks Sink on First Day of 2016 on China, Mideast Worries

Brent crude, the worldwide standard, edged down 6 cents to close at $37.22 a barrel in London. If the CSI 300 index, which reflects the performance of 300 stocks traded on the Shanghai and Shenzhen markets, drops or rises 5 percent, the circuit-breaker kicks in to suspend trading for 15 minutes.

The Caixin/Markit purchasing managers’ index slipped to 48.2 in December, marking the 10th consecutive month of shrinking factory activity in the sector.

“Everybody wants their money before it shuts”, Kelly said. His firm manages about $7.2-billion.

The Dow Jones industrial average closed down 276.09 points, or 1.58 percent, to 17,148.94, the S&P 500 lost 31.28 points, or 1.53 percent, to 2,012.66 and the Nasdaq Composite dropped 104.32 points, or 2.08 percent, to 4,903.09. The world’s largest oil supplier executed a prominent Shiite cleric that prompted protesters to set fire to the Saudi Embassy in Tehran and Iran’s top leader to criticize Saudi Arabia. “The Canadian market is starting to show some strength”.

But external circumstances are not friendly, as lackluster global demand and decreased trade are expected to continue through the year. The Brazilian real fell 2% against the USA dollar. The price of gold rose 1.2pc to $1,073 per ounce. Barrick Gold Corp. added 5.57 per cent and Goldcorp Inc. increased 3.44 per cent. The Shanghai Composite had tumbled 6.8 per cent and the Shenzhen Composite plummeted 8.1 per cent Monday.

Benchmark German 10-year bonds opened higher, rising with European peers from Austria to France.

On the first trading day of 2016, U.S. stocks continued a downward trend that ended 2015 with major indices appearing to take a nosedive on continued fears of troubling times in China’s economy. Trading in China was stopped prematurely after circuit breakers were triggered during their first day they were implemented. Local stocks fell 2% and the currency too depreciated two-thirds of one per cent against the U.S. dollar.

But crude prices then retreated on worries that the weak Chinese data could portend slower global growth, which also hurt Wall Street and sent key indexes down more than 2 percent.

In Europe, the Stoxx 600 Index finished the first trading day of 2016 with a 2.5 percent drop from the previous close. “The extreme reaction of investors in China … suggests that the market is highly risk averse and New Year cheer is in short supply”. Yet even including today’s pullback, stocks are up more than 6% since that time.

China’s yuan currency hit its lowest in more than four years after the central bank lowered its guidance rate and factory activity contracted for a 10th straight month in December, at a sharper pace than in November. The move exacerbated fears of a more serious slowdown.

The reaction to the manufacturing report, released by Chinese media group Caixin, also showcases investors’ lack of confidence in China’s official economic reports. China is transitioning from manufacturing to a service economy, he said.

The sell-off was widespread but not as deep as the slide caused by worries of a China-led global slowdown in August when the Dow tumbled more than 1000 points at one point. Bahrain severed diplomatic ties with Iran on Monday following Saudi Arabia’s decision to cut ties with Iran on Sunday.

“Underlying fundamentals of the United States economy remain very sound”, Mester said Monday in an interview on Bloomberg Television. “The supply glut is outweighing the geopolitical tension”. Oil was down 30 cents to $36.70 a barrel in New York Mercantile Exchange. Iran and Saudi Arabia sit on either side of the Persian Gulf, the site of the world’s biggest concentration of oil tankers.

About 8.5 billion shares changed hands on USA exchanges, above the 7.2 billion daily average for the past 20 trading days, according to Thomson Reuters (Dusseldorf: TOC.DU – news) data.