US, European markets slump amid China fears as global rout deepens
Dow Jones down more than 1,000 points moments after the open before recovering
US stocks tumbled in opening trade on Monday as a global equity slump worsened following another big drop in Chinese stocks.
About 15 minutes into trade, the Dow Jones Industrial Average stood at 15,916.91 down 542.84 points (3.30 per cent). The Dow was down more than 1,000 points moments after the open before recovering somewhat.US stocks sinks nearly 600 points on worries about China
The broad-based S&P 500 sank 62.61 (3.18 per cent) to 1,908.28, while the tech-rich Nasdaq Composite Index fell 180.66 (3.84 per cent) to 4,525.38.
Among Dow members, tech giant Apple was down 4.3 per cent, JPMorgan Chase fell 3.6 per cent, Home Depot lost 4.1 per cent and DuPont sank 6.2 per cent.
The losses in US equities came with other rocky moves in global markets, including a drop in US oil prices below US$40 a barrel and a sharp fall in the US dollar against other major currencies.
On Monday, the Shanghai index plunged 8.49 per cent.
“The fog of fear over the state of the Chinese economy is only thickening, and with little in the way of non-Chinese news to come this Monday, the markets are going to struggle to escape today without some fairly ugly scars,” said Connor Campbell, Spreadex financial analyst.
European stocks slumped on Monday after a rout in Chinese markets, wiping hundreds of billions of euros off leading shares and sending one benchmark index to a seven-month low.
The pan-European FTSEurofirst 300 fell 3.2 per cent to 1,381.77 points by midsession, taking roughly 270 billion euros off the value of shares.
The index sank to its lowest level since January, having lost over a trillion euros in market value since the start of the month as China’s devaluation of the yuan stoked fears of global economic deflation.
Chinese stocks plunged more than 8 per cent on Monday, in their biggest one-day loss since the height of the global financial crisis in 2007 after Beijing held back expected policy support at the weekend following last week’s 11-per cent slide.
The STOXX 600 Basic Resources Index, whose constituents are mostly mining stocks, and the energy sector fell 5.9 per cent and 4.2 per cent respectively, as commodities slumped to multi-year lows, China being one of the world’s biggest users of metals and oil.
Shares in banks and asset managers also fell sharply, while the Euro STOXX Volatility Index rose 4.8 points to its highest level since October last year – more evidence of investor unease.
Nevertheless, strategists at JP Morgan Cazenove and Taube Hodson Stonex’s Evans said that the sell-off may have been overdone.
“Momentum may carry developed markets lower – the US in particular has risen so strongly and to such a high valuation that a correction was due,” Evans said.
“European markets have not re-rated to anything like the same extent and remain attractively valued in our view – though they too may sag a bit further.”
However, strategists at Societe Generale warned that their basket of European stocks with strong business ties to China, which includes carmakers and luxury goods companies, might come under more selling pressure in the near-term.
