Markets mauled by China trading
GLOBAL markets capitulated yesterday as nervous investors fretted about a Greek exit from the eurozone and the worst rout in China for more than 20 years.
Shares around the world and commodities including copper and oil were caught in the carnage along with the euro as well as the Australian and New Zealand dollars.
The latest sell off came amid mounting fears over the future of Greece following its rejection of bailout terms from the International Monetary Fund, European Commission and European Central Bank.
Investors were also spooked by developments in China where hundreds of companies have suspended trading in their shares to protect themselves from the slump.
The IMF did little to soothe the nerves when it warned that a global slowdown and political and economic upheaval in Greece, the Middle East and Ukraine could derail the US economy. It urged the Federal Reserve to delay rate hikes in the world’s biggest economy until next year – and added that further gains by the dollar posed a threat to other regions of the world.
Tony Cross, market analyst at online trading firm Trustnet Direct, said: ‘Investors are squaring up to a growing tide of uncertainty right now. We’ve had that big sell- off in China, Greek jitters are rattling nerves in Europe and there’s also the sceptre of rate hikes across the Atlantic. Equity markets may be looking comparatively resilient right now – and that is worth applauding – but it’s worth bearing in mind that volatility is here to stay.’
The FTSE 100 index closed down 103.47 points or 1.6pc at 6432.21 – taking its losses since its April high to 9.5pc or nearly £172bn.
European stock markets fared even worse with Milan down 3pc, Paris off 2.3pc, Frankfurt 2pc and Madrid 1.8pc as the Greek crisis continued to take its toll.
Shares were also on the slide on Wall Street following another session of heavy selling in China where markets have dropped by a third in less than a month in the country’s steepest decline since 1992.
Some £2trillion has been wiped from the value of listed firms in China during the sell-off and more than 900 companies – or more than a third of those listed in Shanghai and Shenzhen – have suspended trading. Commodities have also come under pressure in recent days with gold, silver and platinum among those in the firing line.
Copper – known as ‘Dr Copper’ by traders because it serves as an indicator for the health of the global economy – fell another 5pc yesterday. The price of oil has also tum- bled in recent days to as low as $55.10 a barrel yesterday – a fall of more than 20pc since its year high of nearly $70 in May.
Kevin Norrish, a commodities analyst at Barclays, said: ‘China is the largest consumer of copper. The growth outlook for China’s economy is uncertain.’
The euro endured another torrid day on the currency markets, falling more than 1pc against the US dollar to as low as $1.0917, a level not seen for more than five week. The single currency fared better against the pound as disappointing manufacturing figures in the UK, showing output fell 0.6pc in May, weighed on sterling. The Australian dollar hit a six-year low while the New Zealand dollar fell for an eighth day in a row amid worries the Chinese slowdown will hit demand for Australian metals and dairy products from New Zealand.