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US stock markets follow global plunge as China concerns deepen US stock markets follow global plunge as China concerns deepen
(about 2 hours later)
US stock markets fell on Friday following a broad sell-off on markets across the world as investors become increasingly concerned about the health of the Chinese economy. World stock markets tumbled in their worst week of the year on Friday as concerns about the health of the Chinese economy rattled investors across the globe.
Related: Stock market falls: four factors stoking global economic fearsRelated: Stock market falls: four factors stoking global economic fears
All of the main US indices were down about 1% by 10am ET, following falls on Wednesday and Thursday as investors continued to sell riskier stocks and those that might exposed to a slowdown in China. Worries about the world’s second-largest economy intensified when new data suggested Chinese factory activity had slowed to levels last seen in 2009 and added to investors fears about the country’s economy since Beijing devalued its currency last week.
The Dow Jones Industrial Average was down 126 points, or 0.74%, to 16,865 points. The S&P 500 was off 0.66% to 2,022 points, and the Nasdaq was down 0.63% to 4,847 points. All of the main US indices were down Friday, the fourth day of falls. Just after 11am ET the Dow Jones Industrial Average was down 314 points, or 1.85%, the S&P 500 was off 1.85% and the Nasdaq was down 2.25%. The S&P 500 is down 4% for the week, and poised for its worst week since 2012.
Stocks fell even more sharply in Europe, Asia and Australia. Japan’s Nikkei average dropped almost 3% to six-week lows on Friday, while the Kopsi index in South Korea fell 1.92%. The FTSE 100 in London was down almost 100 points or 1.56% to 6,269. The dollar fell to a two-month low against the euro and added to speculation that the Federal Reserve may now not raise US interest rates next month, as had been widely expected by economists.
Stocks had already fallen sharply in Europe, Asia and Australia. In London the FTSE 100 closed down 180 points, or 2.8%, to 6,187.65 – the lowest it has been this year and the biggest one day fall since October 2014. The UK index closed down for nine straight sessions – its longest losing streak since 2011. The FTSE 100 has fallen by 5.6% this week, which equates to around £93bn ($146bn) being wiped off the value of the UK’s largest listed companies.
The Euro Stoxx 50 of the continent’s 50 biggest companies closed down 2.94% to 3,254.77 points and the pan-European FTSEurofirst 300 index fell 1.8% to 1,450.18 points, its lowest level since January and on course for its biggest weekly fall of the year. France’s CAC-40 declined 2.2% while Germany’s DAX fell 1.9%.
The global stock market falls came after Beijing released manufacturing data showing fresh evidence of problems at the heart of the Chinese economy. The preliminary Caixin China Manufacturing Purchasing Managers’ Index for August fell to a 77-month low. Following the report the Shanghai Composite Index dropped 4.3% to its lowest level since March.
“China has sent shockwaves through global markets and raised numerous questions on the outlook,” analysts at Societe Generale said. “To our minds, the gradual recovery taking shape in the advanced economies can weather what we expect will be a prolonged period of weaker growth in a number of the major emerging markets.”
David Madden, market analyst at IG, said: “China has been on a mission to keep up the illusion of a gradual slowdown, but dealers aren’t buying it anymore.”
Nigel Green, chief executive of financial consulting firm deVere Group, told Reuters: “There are many, and legitimate, contributing factors to the global economic slowdown narrative. These include China-related issues, such as the recent devaluation of its currency, the stock market’s boom and bust in recent months, and slower GDP growth.
“I believe that this volatility is likely to remain with us, at least until the end of the year ... But for most long-term investors, fears of a near-term financial apocalypse are overdone.”
Connor Campbell, an analyst at Financials, predicted more lows to come. Oil and mining stocks were “drowning in losses” from the beginning of the day, he said.
Japan’s Nikkei average dropped almost 3% to six-week lows on Friday, while the Kopsi index in South Korea fell 1.92%.
The Australian stock market, which is heavily loaded with companies reliant on Chinese growth, closed down 1.4%. The benchmark ASX 200 has lost 8.5% so far this month – the steepest monthly fall since the 2008 global financial crisis.The Australian stock market, which is heavily loaded with companies reliant on Chinese growth, closed down 1.4%. The benchmark ASX 200 has lost 8.5% so far this month – the steepest monthly fall since the 2008 global financial crisis.
Friday’s declines were triggered by fresh evidence of problems at the heart of the Chinese economy, the world’s second-largest after the US. China’s factory sector shrank at its fastest pace in more than six years in August as domestic and export demand dwindled. The Australian dollar, considered a liquid proxy for China demand, slid to $0.7285 at one point and was last trading at $0.7330, a fall of 0.08%. The Malaysian ringgit hit a 17-year low and South Korea’s won fell again to take its weekly losses against the dollar to 1.8%.
Tony Cross, an analyst with Trustnet Direct in London, said the FTSE could be heading for its worst week this year. “As it stands, the FTSE 100 is on course to post its biggest weekly decline of the year so far and there’s not a great deal on the agenda that would appear to have the ability to salvage the situation before the weekend break,” he said. “The perfect storm that has enveloped EM local markets looks set to continue,” Barclays analysts said in a note.
Connor Campbell, an analyst at Financials, also predicted fresh lows. Oil and mining stocks were “drowning in losses” from the beginning of the day, he said. The fresh fears also sent the oil price down to a more than 6-year low, and set it on track for its eighth straight weekly decline. Brent fell 2.57% to $45.42 a barrel.
Oil’s run of weekly losses is its worst since 1986, when the Organization of the Petroleum Exporting Countries (Opec) ramped up production and sent it as low as $10 a barrel.