The global equity sell off sparked by the surprise Chinese stock-market rout late yesterday, spread to Europe and Wall Street overnight and will infect Australia and Japan this morning.
Wall Street fell for a fifth trading session in a row, down between 0.6% and 1%, European shares fell 2.2% according to thew Stoxx 600 index, and apart from Australia and Japan, Asian shares were dragged lower by the second worst fall in Shanghai in eight years of 8.5%.
Australia and Japan had escaped the full impact of the late slide in China because they had closed before the rout really got underway – Tokyo did lose 0.9%,but nowhere near the 3.3% slide in the later closing Hong Kong market or the slide in China.
Markets in Frankfurt and Paris fell more than 2.5% , while London’s FTSE 100 ended down 1.13% and that all saw MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.7%.
The Australian market actually finished higher yesterday (after starting lower following Wall Street’s falls on Friday night), but will be sold off this morning with the share futures contract pointing to a loss of more than 40 points. The Aussie dollar was trading around 72.75 US cents this morning.
Oil fell under $US48 a barrel in New York to new four month lows, copper dipped 1% to new six year lows in London, but gold popped several dollars an ounce, but remains under $US1,100 an ounce.
Grain prices also fell as fears about the size of the US harvests were settled by continuing good weather across the huge Midwest and southern growing areas.
The only bright spot for local investors was iron ore up which saw a rise of 1.8%, to $US52.35 a tonne in China.
The ASX 200 yesterday added 23 points or 0.4% to close at the day’s high of 5589.9, halting a three-day losing streak, while the All Ordinaries Index climbed 22 points or 0.4% to 5579.2.
Those gains will be unwound this morning, and investors will once again be watching the opening in Chinese markets around midday with more than just casual interest.
The Shanghai Composite Index plunged 8.5% at 3,725.56, its second-straight day of losses and worst daily percentage fall since February 27, 2007. The smaller Shenzhen Composite fell 7% to 2,160.09 and the small-cap ChiNext closed 7.4% lower at 2,683.45.
The fall came out of the blue and was blamed on a myriad of factors from rising pork prices, to a drop off in government buying of shares on the Chinese markets in recent days, to a sudden surge of margin calls.
In the US, the Nasdaq Composite led the way lower, falling 48.85 points, or 1%, to 5,039.78. The Dow fell 127.94 points, or 0.7%, to 17,440.59, and the S&P 500 dropped 12 points, or 0.6%, lower at 2,067.64.
Traders blamed everything from this week’s Fed meeting, to weak earnings, to the sell-off in China and just a feeling on unease about the outlook for stocks in the current earnings season.
But the surprise nature of the slide in China certainly spooked a lot of investors in Europe and the US.
