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| Global stocks in a tailspin as Chinese factory slump drags on markets | Global stocks in a tailspin as Chinese factory slump drags on markets |
| (35 minutes later) | |
| Related: Eight reasons why China’s currency crisis matters to us all | Related: Eight reasons why China’s currency crisis matters to us all |
| Stock markets across Asia-Pacific continued to fall on Friday after more signs of a weakening Chinese economy compounded overnight losses on Wall Street and European bourses. | Stock markets across Asia-Pacific continued to fall on Friday after more signs of a weakening Chinese economy compounded overnight losses on Wall Street and European bourses. |
| China’s factory sector shrank at its fastest pace in more than six years in August as domestic and export demand dwindled, a private survey showed, adding to worries that the world’s second-largest economy may be slowing sharply. | China’s factory sector shrank at its fastest pace in more than six years in August as domestic and export demand dwindled, a private survey showed, adding to worries that the world’s second-largest economy may be slowing sharply. |
| China’s surprise devaluation of the yuan and heavy selling in its stock markets in recent weeks have sparked fears that it could be at risk of a hard landing which would hammer world growth, sending financial markets into a tailspin. | China’s surprise devaluation of the yuan and heavy selling in its stock markets in recent weeks have sparked fears that it could be at risk of a hard landing which would hammer world growth, sending financial markets into a tailspin. |
| Markets in countries whose economic fortunes are closely linked to China’s growth tumbled. Japan’s Nikkei average dropped more than 2% to six-week lows on Friday while the Kopsi index in South Korea fell 2.25%. | Markets in countries whose economic fortunes are closely linked to China’s growth tumbled. Japan’s Nikkei average dropped more than 2% to six-week lows on Friday while the Kopsi index in South Korea fell 2.25%. |
| Shares in Australia are having their worst month since the global financial crisis hit in October 2008. On Friday afternoon the benchmark ASX200 was down 2.2% at 5,173 points and is down 8.8% so far in August, according to broker Commsec. | |
| The Australian dollar was also hammered, falling 0.5% to as low as US72.85c. The Aussie, which is seen as a proxy for the Chinese economy, has fallen about 1% in the past week. | |
| The Hang Seng stock index in Hong Kong was down 2.32% while the Shanghai Composite index was 3% lower. | |
| Commodities also suffered. US crude hit fresh six and a half year lows near $40 a barrel as it headed for its eighth straight weekly decline, the longest weekly losing streak since 1986. Brent crude for October delivery was down 29c at $46.33. | |
| “Due to uncertainly about where China’s economy is going, what Beijing will do [in terms of monetary policy] and how much the impact it will have on the global market, anything related to China worries is sold,” said Takuya Takahashi, a strategist at Daiwa Securities in Tokyo. | “Due to uncertainly about where China’s economy is going, what Beijing will do [in terms of monetary policy] and how much the impact it will have on the global market, anything related to China worries is sold,” said Takuya Takahashi, a strategist at Daiwa Securities in Tokyo. |
| Japan’s economics minister, Akira Amari, said on Friday he expected China’s government to take steps to prevent its economic slowdown from becoming a global problem. | Japan’s economics minister, Akira Amari, said on Friday he expected China’s government to take steps to prevent its economic slowdown from becoming a global problem. |
| The preliminary Caixin/Markit China manufacturing purchasing managers’ index (PMI) stood at 47.1 in August, well below economists’ expectations of 47.7 and down from July’s final 47.8. | The preliminary Caixin/Markit China manufacturing purchasing managers’ index (PMI) stood at 47.1 in August, well below economists’ expectations of 47.7 and down from July’s final 47.8. |
| The reading was the worst since March 2009, the depths of the global financial crisis, and the sixth straight one below the 50-point level, which separates growth in activity from contraction on a monthly basis. | The reading was the worst since March 2009, the depths of the global financial crisis, and the sixth straight one below the 50-point level, which separates growth in activity from contraction on a monthly basis. |
| The flash PMI, the earliest economic measure to be released about China each month, is closely followed by global investors for clues on the health of the economy. | The flash PMI, the earliest economic measure to be released about China each month, is closely followed by global investors for clues on the health of the economy. |
| “The poor number confirms what higher frequency data has been suggesting, that more weakness in the economy is likely,” said economist Chester Liaw at Forecast in Singapore. | “The poor number confirms what higher frequency data has been suggesting, that more weakness in the economy is likely,” said economist Chester Liaw at Forecast in Singapore. |
| “The authorities claimed that there will be a rebound in demand in the second half but it appears that the opposite is happening. With first half GDP scraping the bottom of the barrel at 7%, the authorities will have a fight on their hands to ensure that the second half of the year comes in at even the same level.“ | “The authorities claimed that there will be a rebound in demand in the second half but it appears that the opposite is happening. With first half GDP scraping the bottom of the barrel at 7%, the authorities will have a fight on their hands to ensure that the second half of the year comes in at even the same level.“ |
| A detailed breakdown of the activity survey showed conditions were deteriorating on almost every level, with factory output sinking to a near four-year low, domestic and export orders declining at a faster rate than in July and companies laid off more workers. | A detailed breakdown of the activity survey showed conditions were deteriorating on almost every level, with factory output sinking to a near four-year low, domestic and export orders declining at a faster rate than in July and companies laid off more workers. |
| US Federal Reserve policymakers discussed China, Greece’s debt crisis and the weak state of the global economy at their last meeting in July, according to minutes of the meeting released this week. | |
| Although many analysts still expect the US central bank to raise interest rates later this year, the odds on the Fed raising for the first time since the crisis appear to be lengthening. | |
| “The irony of what we are seeing is that whatever the Federal Reserve does in September, global markets would still sell off,” said Chris Weston, chief market strategist at IG Markets in Sydney. | |
| US stock futures fell sharply after the PMI report and most Asian stock markets and the Australian dollar extended early losses. Overnight on Wall Street the S&P 500 sank to a more than six-month low on concerns about how China’s slowdown would impact US firms’ earnings and global growth. | US stock futures fell sharply after the PMI report and most Asian stock markets and the Australian dollar extended early losses. Overnight on Wall Street the S&P 500 sank to a more than six-month low on concerns about how China’s slowdown would impact US firms’ earnings and global growth. |