Fears of a China-led global financial slowdown drove Wall Road to its steepest one-day drop in nearly 4 years on Friday and left the Dow industrials greater than 10 % under a Might document. China said over the weekend it will allow pension funds to buy shares for the first time, while penalising major shareholders at publicly traded companies for violating rules that limit stake sales. Tokyo’s Nikkei was down 3 per cent and Australian shares retreated to a 1-1/2 year trough.
The Shanghai Composite Index had lost 246 points to 3,261 at 9:52 (Beijing time).
China’s stocks have slumped, dragging the benchmark index to its lowest level since March, as government support measures failed to bolster equities.
The Shanghai Composite fell as much as 8.5 percent, while the Hang Seng Index was down more than 4 percent. The CSI 300 traded at 3,313.52, down 7.7 percent.
Between June 2014 and June 2015, China’s Shanghai Composite index rose by 150 percent.
While China took the spotlight, analysts pointed to other fundamental factors at play.
“On the surface it would be easy to point the finger at slowing China growth, falling oil prices and emerging market currency wars as the reason why global equity markets have fallen sharply through the summer”, Sean Darby, chief global equity strategist at Jeffries, was quoted as saying by Reuters.
South Korea’s Kospi index got off lightly compared to regional peers, but the index hovered near a seven-month low amid heightened tensions along the Korean peninsula.
“Rising market economies, many reliant on exporting uncooked supplies, have been hit notably exhausting by the spectre of slower Chinese language progress and sliding commodities”.
In coal, the most common source for electricity generation, API2 2016 futures already hit 12-year lows last week, and physical benchmarks like cargoes from Australia’s Newcastle or South Africa’s Richards Bay terminals have dropped to levels last seen before the 2008/2009 boom and bust.
Though its decline was not as grave, the greenback additionally suffered towards key friends just like the euro and yen as worldwide progress worries undermined wagers that the Fed will increase charges in September. The euro was regular at $1.1379 after touching a two-month excessive of $1.1395.
US crude futures are down 2.15% at $39.54, the lowest level seen since the height of the global financial crisis. The 10-year U.S. Treasury yield US10YT=RR fell below 2 percent, diminishing the dollar’s allure.
Traders said while the weakness in the dollar reflected doubts whether the Federal Reserve will be able to hike interest rates next month, without clear signals from the U.S. central bank so far, many commodity and emerging market currencies would continue to struggle.