Stock Sinks as Oil Price Plunges and China Worries Return

Stock Sinks as Oil Price Plunges and China Worries Return

Nazzaro Striano
Gennaio 9, 2016

US stocks are skidding again Thursday on spreading fears about the health of China's economy.

"The sell-off in Chinese equities we have seen this week only emphasizes the point that the stock market intervention may have only delayed the sell-off", said Angus Nicholson, market analyst at IG in Melbourne, Australia. The goal: To have a cheap currency, so China's products are cheap in the world and knock out competitors' products - including those from the U.S. In the past year, as other countries have struggled with weak economies, their currencies have become weak - a benefit to them as they sell globally.

Chinese stock markets were in full disarray Thursday, halting trading within just 30 minutes of opening as prices slumped 7% and triggered the "circuit breaker".

UK-listed mining stocks such as Anglo American and Glencore were badly hit by the latest developments as China is the leading consumer of global metals.

By the end of trading, it was down even more, by 252.15 points, or 1.5 percent, to 16,906.51. At one point it was down 442 points, or 2.6 percent.

The Stoxx Europe 600 Index fell 2.2 per cent. It pared losses of as much as 3.6 percent after China's securities regulator suspended the circuit-breaker that forced local exchanges to shut early for the second day this week. The Nasdaq composite index dropped 146.34 points, or 3 percent, to 4,689.43. Industrial stocks fell, and aerospace company Boeing lost $3.31, or 2.4 percent, to $135.52 and railroad operator Union Pacific shed 76 cents, or 1 percent, to $74.07.

Brad McMillan, chief investment officer of Commonwealth Financial Network, said USA markets will be jumpy for a while, thanks in part to rising interest rates. France's CAC-40 rose 0.3 percent to 4,417.48. Brent crude, a benchmark for global oils, lost 37 cents, or 1.1 percent, to $33.86 a barrel in London.

"A lower yuan will further deflate the demand for commodities and traded goods generally".

The Dow Jones industrial average dropped more than 250 points on Wednesday
The Dow Jones industrial average dropped more than 250 points on Wednesday

Benchmarks in Taiwan, New Zealand and Southeast Asia also fell. This is up at a 2.4 percent annual rate, the fastest growth since July 2011 despite the wipeout in oil prices.

The CBOE Volatility Index (VIX - 20.59) added 1.3 points, or 6.5%.

Market confidence was dented early Thursday by a sharp devaluation in the Chinese currency, which was interpreted as a sign that the authorities are becoming increasingly rattled about the nation's ailing economy. Those worries about China have drowned out signs that the economies of the US and Europe are doing fairly well.

Against a backdrop of a weak economy and, some argue, an overvalued currency, confidence in China had always been in short supply.

IG market strategist Evan Lucas said the Chinese market suspension and recent data showing more weakness in the Chinese manufacturing and services sectors had investors questioning how much pressure the economy is under. Britain's FTSE 100 sank 2.7 percent to 5,908.35. Urban Outfitters climbed 68 cents, or 3.1 percent, to $22.60. Industrial stocks also fell.

In other energy trading, wholesale gasoline declined 1.6 cents to $1.146 a gallon and heating oil lost 1.5 cents to $1.066 a gallon. Dow member Chevron lost 4.0 per cent while smaller oil producers Apache and Anadarko Petroleum slumped 11.5 per cent and 9.8 per cent, respectively.

The euro rose to $1.0825 from $1.0778. The dollar fell to 117.750 yen from 118.38 yen. The yield on the 10-year Treasury note fell to 2.18 per cent from 2.24 per cent. PUMP THE BRAKES: Auto retailer AutoNation said it had to offer large discounts in December, especially on luxury vehicles.