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European stock markets slide again as China worries bite European stock markets fall again as China worries bite
(about 4 hours later)
European stocks resumed their falls on Wednesday as fears about the Chinese economy once again gripped investors and a late plunge in US stocks unnerved the market.European stocks resumed their falls on Wednesday as fears about the Chinese economy once again gripped investors and a late plunge in US stocks unnerved the market.
The FTSE 100 fell almost 2% in early trading to 5,972 points, below the psychologically significant 6,000 mark. Leading British shares had staged a partial recovery on Tuesday after heavy falls on Monday. The FTSE 100 fell almost 2% in early trading to 5,972 points, below the key 6,000 mark. Leading British shares had staged a partial recovery on Tuesday after heavy falls on Monday. By 130pm BST the index of leading shares in London was down 20 points at 6062.
But Sir Martin Sorrell, head of WPP, the world’s biggest advertising company, which employs 16,000 people in China, expressed his confidence in the Chinese economy.But Sir Martin Sorrell, head of WPP, the world’s biggest advertising company, which employs 16,000 people in China, expressed his confidence in the Chinese economy.
“I remain a raging bull in regards to China,” he told BBC Radio 4 Today’s programme on Wednesday morning, adding that the world should not forget how far the Chinese economy had come since 1985 when it “embraced the capitalist economy”.“I remain a raging bull in regards to China,” he told BBC Radio 4 Today’s programme on Wednesday morning, adding that the world should not forget how far the Chinese economy had come since 1985 when it “embraced the capitalist economy”.
He said the Chinese stock market had become overblown and was undergoing a correction, but long-term secular growth in China was here to stay.He said the Chinese stock market had become overblown and was undergoing a correction, but long-term secular growth in China was here to stay.
All FTSE 100 shares were down apart from RSA Insurance. The largest fallers were the miners Glencore, Antofagasta and Anglo American, which all dropped by more than 3%. The largest fallers were the miners Glencore, Antofagasta and Anglo American - other big losers were Unilever, which relies on China and other emerging markets for much of its growth, Standard Chartered, the Asia-focused bank, and the brewer SAB Miller, which jointly owns China’s largest beer producer.
Other big losers were Unilever, which relies on China and other emerging markets for much of its growth, Standard Chartered, the Asia-focused bank, and the brewer SAB Miller, which jointly owns China’s largest beer producer. Germany’s Dax index and France’s CAC 40 fell 1.7% but had recovered by 230pm CET to be down by nearly 1% and 0.5% respectively. European markets came off their worst losses after the European Central Bank hinted at more monetary stimulus.
Germany’s Dax index and France’s CAC 40 fell 1.7% and leading Italian shares were down 1.4%. The sharp falls in European markets, exacerbated by thin August trading, reflected continuing concern about the direction of China’s economy after the country’s central bank cut interest rates on Tuesday. The Chinese stock market suffered a late sell-off to close down 1.3%, its lowest since December 2014, after trading up for much of Wednesday. The People’s Bank of China took fresh action today, by pumping another 140bn yuan into the interbank money market system.
Investor confidence was also hit by a last-minute plunge on Wall Street on Tuesday as investors tried to guess whether the Federal Reserve would start to increase interest rates next month. The Dow Jones industrial average fell 1.3%, having been up by almost 3% earlier in the day. The PBoC’s decision to cut rates for the fifth time in nine months on Tuesday and compel banks to make more money available to lend was the authorities’ latest move to support the world’s second-biggest economy. China’s economic growth and manufacturing output are slowing and shares have plummeted since June.
Michael Hewson, chief market analyst at CMC markets, said: “The inability of US markets to hold on to yesterday’s gains does raise the question of whether we’ve seen the end of the recent weakness in equity markets. It does appear that sentiment remains extraordinarily fragile, which could well mean that we are going to continue to see significant price swings in the coming days.”
The sharp falls in European markets, exacerbated by thin August trading, reflected continuing concern about the direction of China’s economy after the country’s central bank cut interest rates on Tuesday. The Chinese stock market suffered a late sell-off to close down 1.3%, its lowest since December 2014, after trading up for much of Wednesday.
The People’s Bank of China’s decision to cut rates for the fifth time in nine months and compel banks to make more money available to lend was the authorities’ latest move to support the world’s second-biggest economy. China’s economic growth and manufacturing output are slowing and shares have plummeted since June.
Hewson said: “Yesterday’s actions by the People’s Bank of China should have acted as the palliative that equity markets were looking for, and for a while it seemed to work quite well, and yet there was always the nagging doubt that it was a mere attempt at window dressing.”Hewson said: “Yesterday’s actions by the People’s Bank of China should have acted as the palliative that equity markets were looking for, and for a while it seemed to work quite well, and yet there was always the nagging doubt that it was a mere attempt at window dressing.”
China’s problems have hit confidence around the world because its growth has served as a backstop for the global economy since the financial crisis started. China is the world’s biggest consumer of commodities such as coal and metals and is an important market for exports of machinery and, increasingly, consumer goods.China’s problems have hit confidence around the world because its growth has served as a backstop for the global economy since the financial crisis started. China is the world’s biggest consumer of commodities such as coal and metals and is an important market for exports of machinery and, increasingly, consumer goods.
While acknowledging that Chinese policy makers had erred in trying to “fight the market”, Sorrell maintained that “in the fullness of time it will smooth out”.While acknowledging that Chinese policy makers had erred in trying to “fight the market”, Sorrell maintained that “in the fullness of time it will smooth out”.
As for criticism from the west, he said: “They ain’t done too badly since ‘85 and people in glass houses shouldn’t throw stones.”As for criticism from the west, he said: “They ain’t done too badly since ‘85 and people in glass houses shouldn’t throw stones.”
China is WPP’s third-biggest market. Earlier, the company said it expected to hit its full-year net sales and margin targets after a sharp upturn in trading in July.China is WPP’s third-biggest market. Earlier, the company said it expected to hit its full-year net sales and margin targets after a sharp upturn in trading in July.