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Update: US markets tumble, extending global rout; Dow -3.0%

Monday, August 24, 2015 - 21:42
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US stocks rose, following their biggest gains since 2011, amid a relief rally throughout global markets and as data showed the economy grew more than previously estimated.

[NEW YORK] US stocks opened down more than five per cent on Monday before recovering somewhat as a global rout worsened following another big pullback in Chinese stocks. About 75 minutes into trade, the Dow Jones Industrial Average stood at 15,962.74, down 497.01 (3.02 percent). The broad-based S&P 500 fell 45.35 (2.30 percent) to 1,925.54, while the tech-rich Nasdaq Composite Index sank 103.65 (2.20 percent) to 4,602.39.

Shortly after the open, the Dow was off more than six percent and the Nasdaq more than eight percent in panic selling that approached levels that could trigger exchanges to employ circuit-breakers to halt trading. US stocks soon rallied from those depths, but remained headed for a fifth straight day of losses as leading bourses in Europe dropped more than four percent.

Other markets were also rocky, with US oil prices sinking below $40 a barrel and the dollar falling sharply against other major currencies.

The main catalyst for the sell-off and retreat from risky assets has been a pullback in Chinese stocks, which has raised worries about the health of the world’s second-biggest economy.
On Monday, the Shanghai index plunged 8.49 percent.

“The fog of fear over the state of the Chinese economy is only thickening, and with little in the way of non-Chinese news to come this Monday, the markets are going to struggle to escape today without some fairly ugly scars,” said Connor Campbell, Spreadex financial analyst.

The steep equity declines added to talk that the US Federal Reserve was now likely to push back a plan to raise interest rates until later in 2015, or 2016.
That shift in thinking was implied by the fall in the US dollar and by a big drop in yields for the US Treasury bonds. The 10-year yield fell to 1.92 percent from 2.05 percent Friday.

The current slump in US stocks follows a period of steady gains by the market that has most recently seen the Nasdaq climb above 5,000 for the first time since the Internet stock crash of the early 2000s. For the last four years, US stocks have reliably risen at each sign of market unease as buyers have stepped in.

However, the Dow on Friday entered a “correction,” normally defined as a fall of 10 percent or more. The S&P 500 is also flirting with correction territory for the first time since 2011.
The latest bout of anxiety comes as global investors fear Chinese government officials may be unable to avert a serious slowdown in the world’s second-largest economy.
Monday’s fall in Chinese stocks was the worst in more than eight years and came as observers call for much more aggressive moves by the Chinese government to spur the economy, such as tax cuts and steeper interest rate cuts.

US-listed Chinese companies were down sharply, including e-commerce giant Alibaba (-4.4 percent) and Internet search company Baidu (-6.6 percent).
Apple, which had fallen as much as 13 percent earlier Monday, was down 1.2 percent after chief executive Tim Cook told the CNBC network that Apple’s sales continued to show “strong growth” in China in July and August. General Motors, which, like Apple, has bet big on the Chinese economy, was down 3.9 percent, while metals producer Freeport-McMoRan slumped 6.1 percent as China fears pushed copper prices to six-year lows.

Losses elsewhere were broad based. Among blue-chip Dow components, Cisco Systems was off 3.4 percent, Chevron fell 2.9 percent, Disney declined 1.4 percent, JPMorgan Chase lost 3.1 percent and Wal-Mart Stores dropped 2.0 percent.

AFP