|
 Rising tensions in the Middle East added to the gloom. Oil prices
soared more than a dollar to $38.50 before giving back some of those
gains because of the concern over China, which looks set to remain a
drag on the global economy.
Manufacturing surveys showed Chinese factory activity contracted for
a 10th straight month in December and at a faster pace than it
shrank in November.
China's central bank fixed the yuan at a 4 1/2-year low and mainland
Chinese shares fell 7 percent. Stock exchanges halted trading on the
first day so-called circuit breakers came into effect.
The pan-European FTSEurofirst 300 index fell 2.5 percent and the
euro zone's blue-chip Euro STOXX 50 index declined by 2.9 percent.
Germany's DAX dropped 3.7 percent. U.S. stock futures were down 1.7
percent.
The losses in Europe and the United States mirrored the move in
MSCI's broadest index of Asia-Pacific shares outside Japan, which
posted its biggest loss since Aug. 24 last year.
"(Equity) investors are not going to like the start of this year,
particularly when you have news that trading was halted in China due
to a market sell-off," said Naeem Aslam, chief market analyst at
AvaTrade.
Global oil benchmark Brent, which fell 35 percent last year due
because of fears of over-supply in a global slowdown, climbed more
than a dollar to a high of $38.50 per barrel, then slipped back to
$37.97.
The rise came as relations between leading crude producers Saudi
Arabia and Iran deteriorated, raising concern supplies would be
disrupted.
Saudi Arabia, the world's biggest oil exporter, cut diplomatic ties
with Iran on Sunday in response to the storming of its embassy in
Tehran. The attack came after the Saudis executed a prominent
Shi'ite cleric on Saturday.
The Saudi riyal fell sharply against the dollar in the forward
foreign exchange market. One-year dollar/Saudi riyal forwards jumped
to 680 points, near a 16-year high.
SAFE HAVENS
Those tensions prompted investors to seek the safety of bonds.
Yields on triple-A rated German 10-year Bunds falling 6 basis points
to 0.57 percent.
[to top of second column] |
The cautious mood toward riskier assets also helped the Japanese
yen. The dollar fell below 119 yen for the first time since
mid-October. Gold jumped more than 1 percent to $1,073.20 per ounce.
"Concern over the health of the Chinese economy accompanied by
spiking tensions in the Middle East have combined to ensure ... firm
demand for safe-haven assets," Rabobank strategists said in a note.
The offshore yuan fell as low as 6.6331 to the dollar, its weakest
since September 2011. Onshore, the yuan hit its lowest since April
2011, at 6.5350.
The euro firmed 0.4 percent to $1.0904.
Investors are wondering how much further the U.S. Federal Reserve
will raise rates this year after last month's rate increase, the
first in almost a decade.
An immediate focus will be on Monday's ISM survey of U.S.
manufacturing. The survey is expected to show manufacturing is still
contracting after reaching a 6 1/2-year low in November.
"It was quite unusual for the Fed to raise rates when the ISM is
below 50, (which indicates contraction). And we are likely to see
another month of contraction. We have to see how long this will
continue," said Masahiro Ichikawa, senior strategist at Sumitomo
Mitsui Asset Management.
(Additional reporting by Dhara Ranasinghe in London and Hideyuki
Sano in Tokyo, editing by Larry King)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
