US markets plunge following big drop in Chinese stocks

About three-fourths of the 30 stocks on the Dow Jones industrial average and two-thirds of S&P 500 components were in correction territory, meaning their session lows were at least 10 per cent below their 52-week highs. That dragged the Netherlands’s AEX Index down 3.6 percent, its worst day since 2011.


The Dow Jones industrial average fell 387.64 points, or 2.28 percent, to 16,603.05, the S&P 500 lost 46.78 points, or 2.3 percent, to 1,988.95 and the Nasdaq Composite dropped 121.79 points, or 2.5 percent, to 4,755.69.

Concern about China has gathered momentum in recent weeks, both because of its stock-market rout and a surprise move to devalue the yuan-a step that would make its exports more competitive.

There has been a lot of reactions and fears that the Chinese economy is gradually depleting and causing retarded growth in the global economy, which is in turn affecting commodities and world stock markets.

Corrections are natural in a bull market, a pause in the market’s march higher, and this one is long overdue. But in the Fed’s minutes published last week, committee members sent the market mixed messages.

Stocks, commodities, and the Australian dollar – there’s been nowhere to hide but the yield on offer from some shares might still be the best place to be.

But in the bull market, corrections are natural pauses and experts say this one is way overdue.

Shares in Australia are having their worst month since the global financial crisis hit in October 2008. Germany’s DAX index fell 2.3% to its lowest since January.

Falling oil prices should eventually be good for the global economy, Greece and the latest election another sideshow and maybe the US Federal Reserve don’t hike rates at all this year. The euro rose to $1.1450 from $1.388.

Global markets have come under pressure this week on growing concerns about a slowing Chinese economy and slumping oil prices.

In Singapore, the Straits Times Index sank 4.6 per cent for the week to 2,971.01, below the key psychological 3,000 level.

“With more Chinese-led carnage on the markets today only the very fearless are venturing into equities as buying stocks is now like catching falling knives”, said Mike McCudden, head of derivatives at stockbroker Interactive Investor.

Stock index futures for several major indices fell several percentage points before the open to hit limit down levels.

A wide range of commodities have been hammered this year as demand for raw materials has cooled and as the U.S. dollar gains strength against currencies used by developing countries.

Benchmark U.S. crude dropped $1.13 to $39.32 a barrel in electronic trading on the New York Mercantile Exchange.

“You’ve got a central bank in the U.S. that was poised to pull back, but probably won’t, and you’ve got a central bank in China that appears to be ineffective”, said Jack Ablin, chief investment officer at BMO Private Bank. Japanese stocks tumbled to a 5½-month low on Monday morning on a broad sell-off triggered by China growth fears.


Meanwhile, oil prices slid to six-year lows during trade Friday in part on big importer China’s weakness, the impact spilling over to the shares of oil industry businesses.

S A specialist trader works on the floor of the New York Stock Exchange