World stocks tum­ble on China mar­ket fall

Dow Jones in­dus­trial av­er­age plum­mets over 1,000 points

The China Post - - FRONT PAGE - BY ALEX VEIGA AND STEVE ROTH­WELL

U.S. stock mar­kets sank in morn­ing trad­ing Mon­day in a wave of fear that cir­cled the globe af­ter a his­toric plunge in main­land Chi­nese stocks.

The Dow Jones in­dus­trial av­er­age fell more than 1,000 points in early trad­ing and the Stan­dard & Poor’s 500 in­dex slid into cor­rec­tion ter­ri­tory — Wall Street jar­gon for a drop of 10 per­cent or more from a re­cent peak.

The ma­jor stock in­dexes pared some of the losses that dented in­vest­ment ac­counts by mid­morn­ing. U.S. Trea­surys surged as in­vestors bought less risky as­sets.

The Dow was down 378 points, or 2.3 per­cent, to 16,081 points as of 10:59 a.m. Eastern time. The S&P 500 dropped 49 points, or 2.5 per­cent, to 1,921. The Nas­daq com­pos­ite fell 111 points, or 2.4 per­cent, to 4,594 points. The three in­dexes are down for the year.

Height­ened Con­cern

over China

Height­ened con­cern about a slow­down in China had al­ready shaken mar­kets around the world on Fri­day, driv­ing the U.S. stock mar­ket sharply lower. A big sell­off in Chi­nese stocks on Mon­day caused the rout to con­tinue.

That’s left in­vestors un­sure of how to gauge which com­pa­nies are might be a good bet to weather a slow­down in China.

China’s main in­dex sank 8.5 per­cent amid fears over the health of the world’s sec­ond­largest econ­omy.

Oil prices, com­modi­ties and the cur­ren­cies of many de­vel­op­ing coun­tries also tum­bled on con­cerns that a sharp slow­down in China might hurt eco­nomic growth around the globe.

The mar­ket slide was broad. All the sec­tors in the S&P 500 headed lower, with energy stocks notch­ing the big­gest de­cline, 3.4 per­cent. Cabot Oil & Gas fell the most among stocks in the in­dex, slid­ing US$1.50, or 6.1 per­cent, to US$22.90.

In Europe, Ger­many’s DAX was down 3.8 per­cent, while the CAC-40 in France slid 4.6 per­cent. The FTSE 100 in­dex of lead­ing Bri­tish shares dropped 3.9 per­cent.

The Shang­hai in­dex suf­fered its big­gest per­cent­age de­cline since Fe­bru­ary 2007, with many China-listed com­pa­nies hit­ting their 10 per­cent down­side lim­its. The bench­mark has lost all of its gains for 2015, though it is still more than 40 per­cent above its level a year ago.

Un­der­ly­ing the gloom in China is the grow­ing con­vic­tion that pol­i­cy­mak­ers and reg­u­la­tors may lack the means to staunch the losses in that na­tion. The coun­try is fac­ing a slow­down in eco­nomic growth, the bank­ing sys­tem is short of cash and in­vestors are pulling money out of the coun­try, ex­perts note.

China’s dim­ming out­look is draw­ing calls for more eco­nomic stim­u­lus from Bei­jing, though ear­lier gov­ern­ment ef­forts to stop the sell-off in stocks ap­pear to have done lit­tle to sta­bi­lize mar­kets.

The blood­let­ting spread across Asia ear­lier, where Ja­pan’s Nikkei fell 4.6 per­cent, its worst one-day drop since in over two and a half years. Hong Kong’s Hang Seng in­dex fell 5.2 per­cent, Aus­tralia’s S&P ASX/200 slid 4.1 per­cent and South Korea’s Kospi lost 2.5 per­cent.

Those declines fol­lowed tum­bles over the week­end in emerg­ing mar­kets such as Egypt, Dubai and Saudi Ara­bia.

The panic has un­der­scored the scale of the chal­lenge for Chi­nese lead­ers in seek­ing to curb ex­cess in­vest­ment and guide the econ­omy to­ward a more sus­tain­able pace of growth.

In cur­rency trad­ing, the U.S. dol­lar was at 118.72 yen on Mon­day, down from 122.05 yen on Fri­day. The euro rose to US$1.1568 from US$1.1388. Cur­ren­cies fell hard in de­vel­op­ing economies — par­tic­u­larly those that rely heav­ily on the ex­port of com­modi­ties and oil, both of which China is a big con­sumer. The Rus­sian ru­ble dropped 2.3 per­cent to a seven-year low.

U.S. gov­ern­ment bond prices rose. The yield on the 10-year Trea­sury note fell to 2 per­cent.

AP

Pedes­tri­ans walk past the New York Stock Ex­change, Mon­day, Aug. 24.

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