Global assets shaken by China market turmoil

Global assets shaken by China market turmoil

Global assets shaken by China market turmoil

Written by Staff Writer

08 Jan, 2016 | 7:53 am

Wall Street shares closed sharply down after the suspension of trading on Chinese markets for the second time this week spread alarm among investors.

After Asian and then European stock markets fell, Wall Street’s Dow Jones and S&P 500 indexes shed 2.3%.

Earlier, circuit-breakers triggered a suspension in Chinese trading following a 7% fall in the country’s main index.

Later on Thursday, the Chinese authorities said they were suspending the circuit-breaker system.

The mechanism was brought in late last year to reduce volatility on China’s markets and had not been triggered until this week. It will be lifted from Friday.

The slump on Chinese markets prompted renewed panic on global markets. Share dealing was halted in the first 30 minutes, making it China’s shortest trading day on record.

Technology stocks were also hit. Apple slid 4.2%, Amazon 3.9%, Facebook 4.9% and Google parent Alphabet 2.3%.

The tech-rich Nasdaq index closed down 3%.

Amid the uncertainty, the euro gained nearly a cent against the dollar, rising to $1.0870.

The direct financial impact of lower share prices in China is moderate. There is not enough foreign investment in the Chinese market for it to be a major problem. The London consultancy Capital Economics has said foreigners own just 2% of shares.

China is now such a big force in the global economy that it would inevitably affect the rest of the world. It is the second largest economy and the second largest importer of both goods and commercial services.

The pound fell against the euro by more than a cent and a half, to €1.3408.

Investors are nervous after the Chinese central bank moved to weaken the country’s currency, the yuan, for the eighth day running, sparking fears of a currency war.

This move is designed to boost exports by making Chinese goods cheaper outside the country, analysts have speculated.

It is also being interpreted as an indication that consumer demand in China may be slowing more sharply than feared.

Official economic growth in China is still running at just below 7%.

But moves to devalue the yuan suggest attempts to shift the economy from an export-led one to a consumer and services-led one are running into problems.

Legendary US billionaire investor George Soros has warned that 2016 could see a global financial crisis on as big a scale as that seen just eight years ago.

Speaking at the economic forum in Sri Lanka, Mr Soros said China faced a ” major adjustment problem.”

He added: “I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008, according to Bloomberg.

It is not the first time the billionaire hedge fund manager has warned of impending doom on the financial markets. In 2011 he warned the Greek debt crisis that consumed Europe was more serious than the 2008 financial crisis.

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