US stocks calm after Monday’s global selloff

Talk about a scary start to 2016.

The latest freakout on Wall Street comes as China’s stock market crashed 7% overnight, losses so severe that trading had to be halted in the first half hour and the markets remained closed for the rest of the day.

“But the equity markets selloff is more pressing and hard to ignore because of the impact of China on the global economy and overall demand for oil”.

China’s stock market is in complete disarray. The Dow got as low as 16,588 on Thursday morning.

Shares of oil majors Exxon and Chevron fell and the energy index dropped 3.6 per cent as oil prices plunged below $35 a barrel.

Elsewhere, US initial weekly unemployment claims fell by 10,000 over the week to 2 January to 277,000, according to the US Department of Labor.

And the selling that began in Asia spread quickly and painfully to Europe. The use of circuit breakers earlier in the week provoked the sharp move last night as investors panicked after an initial trading halt just a couple minutes into the session. It’s the second time this week the Chinese “circuit-breaker” was activated. The Shanghai composite is down -11.7% and the tech heavy Shenzhen composite out of China is down -15.19%.

The immediate trigger of the sell-off was a report that showed that manufacturing in China fell in December for the 10th straight month. Readings lower than 50 indicate contraction.

Huang Cengdong, an analyst for Sinolink Securities in Shanghai, said he expects more turmoil in the Chinese stock market ahead of corporate earnings reports. He said global markets were facing a crisis and investors needed to be very cautious, Bloomberg reported.

“With headwinds both domestic and external, investors feared a hard landing may be inevitable and rushed to the exits”, Emma Dinsmore, CEO of R-Squared Macro Management, wrote in a client note.

“It’s going to be a turbulent year”, said Kevin Kelly, chief investment officer of Recon Capital Partners.

The U.S. trade deficit narrowed in November likely as efforts by businesses to reduce an inventory overhang pushed imports of goods to their lowest level in almost five years.

CNNMoney’s Fear & Greed Index, which is calculated based on several market indicators, is also flashing “fear”.

Brent crude fell 0.3 per cent, erasing gains of more than 2 per cent after Saudi Arabia and some of its Gulf allies severed or downgraded ties with Iran in the biggest meltdown in relations between the Middle Eastern powers in nearly three decades, raising the spectre of deepening conflicts across the volatile region. Protesters torched a Saudi Arabian Embassy in Tehran on Saturday in response to Saudi Arabia’s execution of 47 prisoners, including Shiite cleric Nimr Baqr al-Nimr.

Meanwhile, tensions in the Middle East also have investors nervous.

In other energy trading in NY, wholesale gasoline rose 2 cents to $1.291 a gallon, heating oil rose a quarter of a cent to $1.126 a gallon, and natural gas edged down 0.3 cent to $2.334 per 1,000 cubic feet.

On the other hand, oil service stocks came under pressure on the day, dragging the Philadelphia Oil Service Index down by 1.9 percent.