If the New Year is to bring new themes for investors to focus on, it hasn’t happened yet. Markets have been swept up in a renewed fear that China’s economic slowdown is picking up speed. The surprisingly weak manufacturing data caused a 7% decline in the CSI 300 prompting a halt in daily trading across Chinese stock markets.
The FTSE 100, CAC and DAX have all seen triple digit declines. Miners are top fallers on the FTSE 100 with Anglo American down over 7% tracking a steep fall in the price of industrial metals. The price of copper fell over 2.5%. The fall in manufacturing activity amongst the small and medium enterprises in China tracked in the Caixin survey could offset the expansion in government deficit spending announced in December. China-exposed financial institutions Standard Chartered and HSBC fell over 4% and 2% respectively.
Oil company shares declined as the price of oil erased an earlier price spike after Saudi Arabia ended its diplomatic ties with Iran. More bad blood between Saudi Arabia and Iran adds to already tetchy Middle Eastern tensions amidst the unrest in Syria and Iraq. Thin liquidity at the start of the New Year probably over-egged the reaction in oil markets to the political spat which is unlikely to disrupt output.
Once sanctions are lifted, Iran is unlikely to let relations with Saudi Arabia dent plans for a big increase in exports. Iran may decide to take more of a hard-line stance against the Saudi-oriented policy of not cutting production at the next OPEC meeting, but that’s in half a year so there’s time for things to calm down by then.
The British pound fell against the euro as UK manufacturing saw a surprise decline December whilst Eurozone manufacturing was boosted more than expected by a jump in Italian activity according to PMI data.
US stocks look set for heavy losses on Monday’s open, tracking weakness in China and continuing the fall seen on New Year’s Eve.
USA pre-opening levels
S&P 500: 32 points lower at 2,011
Dow Jones: 275 points lower at 17,150
Nasdaq 100: 79 points lower at 4,514
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