For Markets, A Bad Start To The Year

U.S. stocks tumbled more than two percent early Monday, joining a global sell-off sparked by a seven percent plunge in the Shanghai stock market.

The Dow slumped 276.09 points or 1.6 percent to 17,148.94, while the NASDAQ plummeted 104.32 points or 2.1 percent to 4,903.09 and the S&P 500 tumbled 31.28 points or 1.5 percent to 2,012.66.

Analysts said that the A-share market has also been burdened by a slew of negative factors, including disappointing economic data, a weaker yuan and fluctuations in the global markets.

This means there’s no way of knowing when the drop would stop, and global markets responded accordingly, with the FTSE 100 in London going down 2.4 percent and Germany’s DAX down 4.3 percent. The Standard & Poor’s 500 index closed down 1.5 percent while the technology heavy Nasdaq composite index fell 2.1 percent.

The Chinese economy expanded at a 6.9 percent annual rate from July through September, well below the torrid double-digit pace of a few years ago and undershooting the overall 7 percent target Beijing set for the year.

Last year, steep declines in Chinese stocks were periodically followed by dramatic, if less severe, declines in USA and European stocks.

Many economists remain relatively optimistic about the USA economy this year.

Markets across Asia were stung by the data, as well as news that Saudi Arabia had severed diplomatic ties with its old foe Iran on Sunday after protesters ransacked its embassy in Tehran following the execution of a Shiite cleric.

The circuit breakers were instituted in the wake of the summer stock market rout as a way to curb volatility and give investors a chance to digest market-moving news.

The release late Tuesday in China of data on the country’s services sector, the Caixin/Markit Purchasing Managers’ Index, should be relatively good, Kleintop said. On Friday, an official manufacturing index also showed a persistent contraction activity despite Beijing’s stimulus measures. China is in the midst of a massive plan to shift its economy away from its traditional reliance on industry and exports and toward consumer spending. They had both surged in Asian trade Monday on tensions fuelled by the row between Iran and Saudi Arabia, but later retreated as fears over a global glut and weak demand returned.

Most pundits think the market fell on a report saying the manacturing sector contracted for the 10th consecutive month in December.

Brent for February delivery was quoted 5 cents firmer at $US37.33 a barrel, while U.S. crude added 13 cents to $US36.89.

On the economic front, the US December ISM manufacturing Index was 48.2, below market expectations and down from November’s 48.6 points. The Shanghai Composite was down 7 percent, that is pretty significant.

“I would first of all absolutely agree investment from people in China is one of the drivers in a hot property market, particularly in Australia’s capital cities”, McCarthy said.

In currencies, the dollar rose to 119.54 yen from 119.43 yen in the previous trading session. The yield on the 10-year Treasury note fell to 2.24 percent from 2.27 percent.

The euro fell 0.26 per cent to $US1.0830, while against the yen, the USA dollar fell 0.73 per cent to Y119.42.

Spot iron ore jumped 2 per cent to 4US44.37 a tonne and Dalian iron ore futures were per cent today.