Black Monday: ‘Made in China’ market panic see global stocks plummet

SAO PAULO/ NEW YORK/ LONDON/ MOSCOW: Global stock markets plunged and commodity prices hit new lows on Monday extending a cascading effect following Chinese-led rout, fed by fears of a damaging slowdown in economies around the world, sparking fears of another global crash like that in 2008.

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 with the market sinking again on Monday.

Shanghai Stock Market. PHOTO: AFP

Several European markets followed suit from China, sinking more than seven per cent 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 per cent 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 Monday, with Shanghai closing down 8.49 per cent, the biggest daily loss since February 27, 2007.

Falling oil prices also weighed on market sentiment as they slid below $40 a barrel for the first time since 2009, after weak Chinese manufacturing data deepened fears that the Asian giant is growing more slowly than thought.

So far, global equities have lost more than $5 trillion since China's shock currency devaluation on August 11.

"The fog of fear over the state of the Chinese economy is only thickening, and with little in the way of non-Chinese news to come this Monday, the markets are going to struggle to escape today without some fairly ugly scars," said Connor Campbell, a Spreadex financial analyst.

Data on Friday showing Chinese manufacturing activity slowed to a 77-month low had added to the gloom, signalling that even a campaign by Beijing with its vast arsenal of reserves has not been able to stimulate growth.

Chinese authorities have since launched unprecedented measures to support stocks. On Sunday state media said the huge national pension fund would now be allowed to buy equities, in a fresh bid to prop up the market.

In other top Asian markets, Hong Kong's benchmark fell 5.17 per cent, Tokyo 4.61 per cent, and Sydney lost 4.09 per cent.

Karachi Stock Exchange. PHOTO: AFP

Oil prices also tumbled, accelerating losses after breaking below the $40 barrel for the first time in six years Friday on concerns about waning demand in China, the world's top energy importer.

Europe reels amid Migrant crisis

As if the recent decline of Greek, Spanish and Portuguese economies and a migrant crisis brewing on its eastern shores was not enough, Europe saw its key stock markets plunging by as much as 5.35 per cent.

London's benchmark FTSE 100 index sank 4.67 per cent to close at 5,898.87 points.

The CAC 40 in Paris plunged 5.35 per cent to end the day at 4,383.46 points, after earlier shedding more than eight per cent. Frankfurt's DAX 30 lost 4.70 per cent to finish at 9,648.43 points, its biggest percentage decline since November 2011.

"We're following the situation in China very closely. However, the concrete fallout for the German economy is likely to be limited," a government spokesperson for Europe's biggest economy told reporters in Berlin.

Other European markets that dropped more than five per cent 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 per cent on Monday, also succumbing to the Chinese-led sell-off and domestic political uncertainty ahead of likely elections next month.

Some analysts however were cautioning against the panic.

"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. But by the end of the day that was proven to be untrue with nary a stock exchange left unaffected by the downward trend.

The euro meanwhile strengthened to $1.1578, after earlier reaching $1.1714, its highest level since mid-January compared with $1.1386 late in New York on Friday.

US stocks dragged down by global financial market plunge

US stocks finished sharply lower Monday, but far above the session's floor, following a bruising day in global financial markets sparked by mounting worries over the Chinese economy.

The broad-based S&P 500 tumbled 77.68 points (3.94 per cent) to 1,893.21, pushing the index into "correction" territory, normally defined as a loss of 10 percent or more.

The Dow Jones Industrial Average dropped 588.47 (3.58 per cent) to 15,871.28, while the tech-rich Nasdaq Composite Index shed 179.79 (3.82 percent) at 4,526.25.

PHOTO: AFP

US stocks were in the red all day after the latest plunge in the Shanghai equity index ignited another round of turmoil in global equity markets. Bourses in England, France and Germany all fell at least 4.5 per cent.

But the main Wall Street indices finished well above their lows for the session. The Dow fell more than 1,000 points, or six per cent, after the opening bell, but soon recovered some of those losses. The Nasdaq was down more than 9.0 per cent at one point.

A short-lived rebound toward break-even territory came after Tim Cook, the chief executive of Apple, wrote an open letter to CNBC saying the world's most valuable company was still confident in the key Chinese market.

"I can tell you that we have continued to experience strong growth for our business in China through July and August," he said.

Apple shares, which had fallen as much as 12 per cent in early trade, rebounded back to positive territory, but then eased again to close down 2.5 per cent at $103.15, pulling the major indices with them.

US stocks have now dropped for five straight days, and analysts warn of more turmoil possibly ahead.

"The only thing that's guaranteed for the next few days is volatility, whether it's to the upside or downside," said Michael James, managing director of equity trading at Wedbush Securities.

Latin American stocks fall on China plunge

Stock markets around Latin America posted heavy losses Monday as plunging Chinese shares unleashed fresh turmoil on global markets.

In Brazil, home to the region's largest stock exchange, the IBOVESPA index in Sao Paulo closed down 3.03 per cent, after plunging 6.49 per cent in opening trade.

Mexico's IPC index closed down 1.64 per cent, regaining some ground after opening with losses of more than six percent.

Argentine stocks closed down 6.3 percent, Chilean shares lost 2.77 per cent and Colombian shares shed 3.52 per cent.

The losses appeared to be driven by concern over shrinking Chinese demand for raw materials.

In Brazil, the companies leading the sell-off were mining giant Vale -- the world's top iron producer -- and steelmakers such as Gerdau.

PHOTO: AFP

China is the leading market for iron exports.

Brazilian oil giant Petrobras, which has been hit hard by a multi-billion-dollar corruption scandal in recent months, also posted heavy losses.

The jitters over China also took a toll on currencies around the region.

The Brazilian real lost 1.7 per cent to 3.555 to the dollar, and the Mexican peso lost 1.2 per cent to 17.43 to the dollar.

The Chilean peso fell to a 12-year low of 702.1 to the dollar and the Peruvian nuevo sol dropped to a nine-year low of 3.28 to the dollar.

In Argentina, the gap between the official and black-market exchange rates surged to more than 70 per cent: officially, a dollar was worth 9.28 pesos, but on the parallel market it fetched 15.84.

Ruble falls to 2015 low as stocks plunge

Russia's battered ruble sank Monday to its lowest point this year as Asian and European stock markets nosedived on concerns over the Chinese economy.

Moscow's dollar-denominated RTS stock index had tumbled 4.94 per cent by the close of trading as the euro passed the symbolic 80-ruble mark for the first time since December, standing at 81.16 rubles by 1725 GMT.

The Russian currency also fell against the dollar, dropping to 70.10 rubles.

The ruble-denominated Micex closed down 1.78 per cent.

The slide in oil prices and Western sanctions over Moscow's role in the Ukraine crisis have pummelled the Russian economy in recent months, with the ruble collapsing.

Russia's recession deepened in the second quarter as gross domestic product contracted by 4.6 per cent compared with the same period last year.

The ruble has fallen more than 20 per cent against the dollar in the past two months, sparking fears of more instability after a period of relative recovery.

Russia's central bank -- which did not comment on the currency's depreciation on Monday -- was forced to drastically hike interest rates in December as it battled the ruble's plunge but has cut back the rate this year to assuage inflation fears.

The Bank of Russia's key rate stands at 11 per cent.

Inflation rose to a vertiginous 15.6 per cent last month, shrinking Russians' purchasing power. The ruble's crash has meanwhile made imports much more expensive.

"Of course I'm not pleased that prices have gone up," hotel worker Yulia Seleznyova told AFP. "This is directly affecting me, and I'd like the ruble to go back up."

The ruble lost around half of its value in 2014 but recovered slightly as energy prices stabilised this year, allowing officials to claim the worst of the crisis had passed.

But the recent decline -- resulting in part from a renewed fall in oil prices that hit six-year lows on Monday -- has highlighted how volatile the situation remains.

"The ruble's value is most of all influenced by oil prices," RBK business daily quoted Alexander Muhlberger, a director at BCS financial group, as saying.

"If oil prices keep declining, then it's clear what the ruble's trajectory will be."

Russian authorities have predicted that GDP will contract by 2.8 per cent this year before picking up again next year.