Stocks Fall Sharply on China Slowdown Worries

Stoxx Europe 600 falls 2.2%, led by 3.3% drop in Frankfurt’s exporter-heavy DAX index

The Wall Street Journal

By RIVA GOLD

Jan. 4, 2016 4:20 a.m. ET

1 COMMENTS

Global stocks sold off sharply on the first trading day of 2016 following fresh signs of an economic slowdown in China.

Weaker-than-expected manufacturing data and a falling currency triggered declines in mainland Chinese stocks so steep that authorities halted trading there for the rest of the day.

European stocks also fell sharply, with the Stoxx Europe 600 down 2.2% in early trade, led by a 3.3% drop in Germany’s exporter-heavy DAX index.

Meanwhile, futures markets pointed to a 1.4% opening loss for the S&P 500. Changes in futures aren’t necessarily reflected in market moves after the opening bell.

“The rout in China is placing pressure on markets more globally,” said economists at Investec in a note.

Losses in European equities were led by the basic resources and auto sectors, which are both sensitive to Chinese demand.

Miners were down 3.7%, led by a 7.2% fall in Anglo American PLC and a 5.8% drop in Glencore PLC.

The moves came after data showed Monday that Chinese factory activity fell in December, casting doubts on the efficacy of Beijing’s policy of monetary easing and ramped-up spending to boost growth.

In the auto sector. Fiat Chrysler Automobiles NV was down 31.5% after distributing its 80% stake in sports-car unit Ferrari to shareholders.

The CSI 300, a benchmark of the largest 300 stocks listed in Shanghai and Shenzhen, fell 7% just after 1.30pm local time, triggering a new circuit-breaker system, which took effect on Monday.

The Shanghai Composite Index ended 6.9% lower.

A weaker local currency also put pressure on local stocks. The offshore and onshore yuan both traded at their weakest levels since 2011 after China’s central bank guided its currency weaker Monday.

Losses in China weighed on other Asian markets. Japan’s Nikkei Stock Average lost 3.1% and Hong Kong’s Hang Seng Index fell 2.7%.

“A fall in Chinese markets has brought about a jittery start to the year,” said the economists at Investec.

In commodities markets, Brent crude oil was last down 0.2% at $37.14 a barrel. Rising tensions between Saudi Arabia and Iran had sparked speculation about a possible disruption to supply, pushing oil prices higher in Asian trade. But expectations for more crude supply from Iran this year weighed on oil prices in 2015, as Brent crude dropped 35%.

Gold was up 1.1% at $1072.10 an ounce following its third consecutive annual loss in 2015.

In currencies, the euro was up 0.7% against the dollar at $1.0929, while the dollar fell sharply against the yen, down 1.1% at ¥119.0060.

Fresh data this week will offer investors more clues into the health of the U.S. economy, including the Institute for Supply Management’s purchasing managers index later Monday.

Write to Riva Gold at riva.gold@wsj.com