Stocks sink on China, Mideast worries
First ’16 trading day reminder of fragile global economy
NEW YORK — The new year got off to an inauspicious start on Wall Street as stocks tumbled Monday in a global sell-off triggered by new fears of a slowdown in China and rising tensions in the Middle East.
The Dow Jones industrial average clawed back from a steep early decline but still ended down 1.6 percent, its biggest loss in two weeks. Markets in Asia and Europe were down more.
The wave of selling on the first trading day of 2016 served as a reminder that worries over the fragile global economy that weighed on financial markets last year are not going away anytime soon.
“It’s going to be a turbulent year,” said Kevin Kelly, chief investment officer of Recon Capital Partners. “This isn’t a blip.”
The trouble started in China, where weak manufacturing figures in the world’s second-largest economy sent the Shanghai Composite Index plunging 6.9 percent before Chinese authorities halted trading.
Investors were also unnerved by heightened tensions between Saudi Arabia, a huge oil supplier, and Iran.
Saudi Arabia executed a prominent Shiite cleric, prompting Iranian protesters to set fire to the Saudi Embassy in Tehran on Sunday.
The Dow slumped 276.09 points to 17,148.94. It was down as much as 467 points earlier in the day. The Standard & Poor’s 500 index lost 31.28 points, or 1.5 percent, to 2,012.66. The Nasdaq composite fell 104.32 points, or 2.1 percent, to 4,903.09.
The selling in China spread across markets in other Asian countries, then to Europe. The DAX index in Germany tumbled 4.3 percent. Britain’s FTSE 100 fell 2.4 percent, while France’s CAC 40 dropped 2.5 percent.
Huang Cengdong, an analyst for Sinolink Securities in Shanghai, said he expects more turmoil in the Chinese stock market ahead of corporate earnings reports. “There will be heavy selling in the near future,” Huang said.
U.S. investors worried about data suggesting that slow overseas growth and low oil prices are continuing to hurt U.S. manufacturers. A report from the Institute for Supply Management showed manufacturing contracted last month at the fastest pace in more than six years as factories cut jobs and new orders shrank.
The slowdown in China is worrisome around the globe because the country’s manufacturers are huge buyers of raw materials, machinery and energy from other countries.
Escalating tensions in the Middle East briefly sent the price of oil surging. Saudi Arabia said Sunday it is severing diplomatic relations with Iran, a development that could potentially threaten oil supplies.
“Oil markets will be concerned that this could be an incremental step in a deteriorating political situation that might ultimately threaten world oil supply,” Ric Spooner, chief analyst at CMC Markets, said in a commentary.