London: Global stock markets plunged and commodity prices hit new lows yesterday extending a Chinese-led rout, fed by fears of a damaging slowdown in the world’s second-largest economy. Global equities have lost more than $5 trillion since China’s shock currency devaluation on August 11.
Chinese stocks have tumbled since peaking in mid-June and authorities have launched broad interventions to try to restrain the drops, but Beijing’s latest market intervention has failed to restore confidence.
Several European markets sank more than seven percent in afternoon trades, while US stocks slumped at the open with the Dow and the broad-based S&P 500 index sinking more than three percent before recovering somewhat. “There is no doubt that the panic begets panic in this market,” Michael Holland, chairman at Holland & Co, said in a Bloomberg Television interview, calling it “Black Monday” and adding “it’s a psychological thing. It’s pervasive. It’s everywhere.”
China-linked shares again led the stocks sell-off, with Shanghai closing down 8.49 percent, the biggest daily loss since February 27, 2007.
In Europe, London’s benchmark FTSE 100 index sank 4.67 percent to close at 5,898.87 points.
The CAC 40 in Paris plunged 5.35 percent to end the day at 4,383.46 points, after earlier shedding more than 8 percent. Frankfurt’s DAX 30 lost 4.70 percent to finish at 9,648.43 points, its biggest percentage decline since November 2011. Near mid-day on Wall Street, the Dow Jones Industrial Average lost 2.89 percent, the S&P 500 sank 2.90 percent, while the tech-rich Nasdaq Composite Index fell 2.70 percent.
Other European markets that dropped more than 5 percent included Amsterdam, Brussels, Milan, Madrid and Oslo whose commodities heavy index finished at a four-year low.
Crisis-hit Greece’s main stock market plummeted more than 10 percent, also succumbing to the Chinese-led sell-off and domestic political uncertainty ahead of likely elections next month.
“The current panic is essentially ‘made in China’. The recent data from other major economies have generally been good and there is little to justify fears of a major global downturn,” said Julian Jessop at research firm Capital Economics.
The euro meanwhile strengthened to $1.1578, after earlier reaching $1.1714, its highest level since mid-January compared with $1.1386 on Friday.
Sterling fell sharply against the euro, on track for its biggest one-day loss against the single currency in over six years as the rout on global stock markets cooled expectations the Bank of England might raise interest rates any time soon. The pound lost as much as 2 percent, a fall not seen since early 2009, as the euro pushed through 74.00 pence for the first time since May.
Russia’s rouble also hit a new 2015 low and stocks sank, battered by falling oil prices and the impact of sanctions over Ukraine.
In other top Asian markets, Hong Kong’s benchmark fell 5.17 percent, Tokyo 4.61 percent, and Sydney lost 4.09 percent.
In India, The BSE Sensex dropped 5.94 percent, its biggest daily percentage fall since January 7, 2009. The index fell to as low as 25,624.72 at one point, its lowest intraday level since August 11, 2014. The Nifty lost 5.92 percent, also its biggest fall since January 7 2009. It earlier hit a low of 7,769.40, its lowest since October 17, 2014.
In the Middle East, Saudi Arabia’s stock market plunged 5.9 percent, leading another day of losses across the Middle East as the region reacted to sliding oil prices and a deteriorating global environment. “Markets in the Gulf are changing their expectations and looking at the possibility of different conditions in future: lower oil prices, perhaps lower government spending,” said Adel Merheb, director of equity capital markets at Dubai’s Shuaa Capital.
For that reason, the sell-off in the Gulf may have further to run, despite valuations that have become considerably cheaper in the last few days, he added.
The Saudi index’s drop brought it to a 29-month low of 7,025 points, breaking major technical support on its December low of 7,226 points. The index, which had plunged 6.9 percent on Sunday, has now lost 23 percent in August, erasing more than $100bn of market value.
Other Gulf markets also fell but less steeply as bargain-hunters, who had deserted the markets on Sunday, returned. The Dubai index came well off its early lows and ended down 1.4 percent at 3,402 points, after plunging 7 percent on Sunday.
Abu Dhabi’s stock index lost only 0.5 percent as a few blue chips rose; Aldar Properties gained 3.4 percent and First Gulf Bank rose 0.7 percent.
Egypt’s stock index, which had tumbled 5.4 percent on Sunday, lost a further 1.9 percent, caught up in the global emerging markets rout. The Kuwait index lost 1.6 percent to 5,816 points. The Oman index sank 3 percent to 5,736 points, while the Bahrain index fell 0.8 percent to 1,305 points.
Agencies
LONDON: European stocks plunged yesterday after a rout in Chinese markets, wiping hundreds of billions of euros off their value and sending one benchmark index to a seven-month low.
The pan-European FTSEurofirst 300 ended 5.4 percent lower, wiping roughly €450bn ($521.42bn) off its total market capitalisation - its worst daily closing performance since November 2008.
The index was down 7.8 percent at one point, its worst intraday loss since October 2008, just after the demise of US investment bank Lehman Brothers.
It closed above those lows but remained on course for its worst monthly loss since 2002. More than a trillion euros of its market value has been lost since the start of the month.
“We have reduced our exposure to emerging markets equities, and in Europe to exporters such as carmakers. We believe there is a panic-selling mode at the moment, and we could see further falls,” said Francois Savary, chief strategist at Swiss bank Reyl.
“Momentum may carry developed markets lower — the US in particular has risen so strongly and to such a high valuation that a correction was due,” said Mark Evans, fund manager at Taube Hodson Stonex Partners.
Reuters
Singapore: Oil futures led a dramatic fall in commodity prices yesterday, with US crude trading below $40 a barrel as fears over China’s economy sent investors fleeing to safe havens like gold.
The Bloomberg Commodity Index, which tracks 22 raw materials, lost as much as 1.7 percent to 86.3542 points to its lowest level since August 1999.
Raw materials have slumped this year as concerns have mounted of weakening demand from China, the world’s second-largest economy and top user of everything from industrial metals and energy to food.
Fears were piqued when China devalued the yuan two weeks ago, a move many took as a signal the economy is in worse shape than thought, and which could hurt the Asian giant’s purchasing power for dollar-denominated commodities.
Resources stocks tumbled, with BHP Billiton closing down 5.02 percent at Aus$22.89 while Fortescue lost 14.62 percent to Aus$1.64 after posting an 88 percent drop in annual profit on weaker iron ore prices. “The steep fall in commodities today is all down to bearish sentiment about China with the huge rout in its equities market,” Daniel Ang, investment analyst at Phillip Futures in Singapore, said. “Investors are fearing further price drops in commodities and are channelling funds to safe havens including gold and the Japanese yen.”
Fresh falls in commodities come after weak Chinese manufacturing data on Friday, which showed activity slowed to a 77-month low, sparked a selloff in London that saw industrial metals and agricultural commodities sag to new multi-year lows.
On the London Metal Exchange, copper lost as much as 2.6 percent to $4,922.50 a metric ton, the lowest since 2009, while aluminium also fell 1.5 percent to its lowest intraday level in six years.
Soybeans, wheat and corn extended losses as well, while rubber dropped to a 10-month low on the Tokyo Commodity Exchange. Palm oil slipped 3 percent in Malaysia.
Gold, meanwhile, was holding steady, benefitting from the precious metal’s status as a safe bet in times of turmoil. Bullion for immediate delivery traded 0.2 percent lower at $1,158.10 an ounce in Singapore afternoon trade.
Sanjeev Gupta, head of the Asia-Pacific oil and gas practice at business consultancy firm EY, said dealers are awaiting preliminary US second-quarter GDP data on Thursday to gauge when the Federal Reserve will raise interest rates.
Minutes from the US central bank’s last meeting dampened speculation of a rate hike in September, but most dealers still expect one before the end of the year — another factor that could hurt commodity prices by making them more expensive for global buyers.
AFP
