China selloff sparks gloomy 2016 start for stocks

Mon Jan 4, 2016 4:21pm EST
 
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By Herbert Lash

NEW YORK (Reuters) - Global equity markets fell sharply on Monday, while gold and bonds rose, after a 7 percent slide in Chinese shares sparked by weak economic data rekindled worries over global growth on the first day of trading in 2016.

Rising tensions in the Middle East also increased demand for safe-haven assets. Crude prices rose above $38 a barrel at one point as some speculated a breakdown in diplomatic ties between Saudi Arabia and Iran could result in reduced oil supplies.

But crude later retreated on worries that the weak Chinese data could portend slower worldwide growth, which also hurt Wall Street and sent key stock indexes more than 1 percent lower.

The S&P 500 and Nasdaq posted their worst start to a year since 2001, while it was the worst for the Dow since 2008.

Emerging markets were especially hard-hit by the China news, with MSCI's index .MSCIEF tumbling 3.37 percent, while its all-country world stock index .MIWD00000PUS fell 2.01 percent.

The selloff in China triggered a circuit-breaker that suspended equities trading nationwide for the first time and put at risk months of regulatory work to restore market stability.

In the United States, the iShares China large-cap ETF (FXI: Quote) fell 3.2 percent, its biggest single-day slide since September.

Investors are justified to worry about global growth as the factory numbers may not fully indicate how quickly China has been slowing down, said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.   Continued...

 
A man checks his mobile phone in front of an electronic board showing stock information at a brokerage house in Beijing, China, January 4, 2016. REUTERS/Kim Kyung-Hoon