US stock markets got the post-New Year’s blues on Monday, opening with their worst performance since 2008, driven down by a slowdown in China’s economy and more trouble in the Middle East.
The Dow Jones Industrial Average closed down 1.6% after staging a late rally. It was still its worst post-New Year performance in eight years. The Dow had been down 2.5% in the morning, a new year trading dip unseen since 1922 when the markets closed down 2.3% on the first day of trading after the holidays.
The S&P 500 lost 30.88 points, or 1.51%, and the Nasdaq Composite dropped 104.32 points, or 2.08%.
The New Year’s rout started after a closely watched survey of China’s vast manufacturing sector showed it shrank for a 10th month running.
Investors across the world joined the sell off. In London, the FTSE 100 lost 2.4%, its worst opening day to a new year in 16 years and the second-worst on record. The pan-European FTSEurofirst 300 lost 2.8% and Germany’s Dax lost 4.3%, its weakest start to a trading year in the history of the index.
In Brazil, the real fell 2% against the dollar and Brazilian equities dropped 1.6% to 42,646.19, the lowest since 16 March 2007, as investors worried the country will fall deeper into recession. Moody’s Investors services is currently reviewing the country’s debt and is soon expected to downgrade its rating to junk amid the country’s political and economic crisis. Moody’s rivals Standard & Poor’s and Fitch made the cut to junk last year.
With all this bad news US markets looked set to open with a sell off even before the opening bell for trading was rung. Compounding woes from China the latest report on the state of the manufacturing sector from the Institute for Supply Management (ISM) proved weaker than expected. ISM’s index fell to 48.2 in December from 48.6 in November, its lowest level since 2009. A level above 50 indicates growth and analysts had been expecting a rise.
“The US manufacturing sector is dangerously close to recession and, given the dollar’s continued appreciation, we don’t anticipate any significant improvement until the second half of this year,” Capital Economics’ US economist Steve Murphy wrote in a note to clients.
Oil rose, briefly, after months of falls. Rising tensions between Saudi Arabia and Iran following the execution of Shia cleric Sheikh Nimr al-Nimr led to speculation that oil supply could tighten. But oil soon lost those gains as investors bet that continuing oversupply would outstrip demand.
Courtesy of Guardian News & Media Ltd