China provoca sell off global.
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Global Stocks Fall Further on China Worries
By
Tommy Stubbington
Updated Aug. 21, 2015 12:31 p.m. ET
A global market rout intensified Friday, pummeling stocks and commodities, as fresh evidence that China’s economy is slowing spooked investors.
Signs of a sharp slowdown in the world’s second-largest economy have unnerved investors since Beijing surprised markets last week by devaluing its currency. Shares in the U.S., Asia and Europe have tumbled along with commodity prices as investors worry about waning Chinese demand.
The S&P 500 was recently down 32 points, or 1.6%, at 2004. The Dow Jones Industrial Average declined 261 points, or 1.5%, to 16730. On Thursday, each suffered their biggest single-day percentage decline since February.
The Nasdaq Composite was 82 points lower, or 1.7%, at 4796.
“It becomes ever more evident that China’s economy is cooling off,” said Jeroen Blokland, a portfolio manager at Robeco, which manages $307 billion of assets.
The pan-European Stoxx Europe 600 ended the session 3.3% lower, closing out its biggest week of losses since August 2011. The index has now lost nearly 13% since its April peak, entering a so-called correction.
Earlier, the Shanghai Composite Index tumbled 4.3%, hitting its lowest level since March, despite Beijing’s efforts to prop up the market in recent weeks. In Japan, the Nikkei fell 2.6% to a six-week low.
An early gauge of China’s factory activity fell to a six-and-a-half year low in August, heaping further pressure on stocks and commodities after Thursday’s global selloff.
“Now we’ve had some harder evidence that China is slowing relatively fast, people have chosen to get out,” said Kiran Ganesh, a multiasset strategist at UBS Wealth Management, which oversees around $2 trillion of assets.
A surge in investor demand for assets considered safest during times of market stress sent the yield on 10-year U.S. Treasury bonds to 2.045%, its lowest level since April. Yields fall as bond prices rise.
The dollar fell by around 1% against the euro and Japan’s yen. The euro and yen have recently tended to rise during times of market stress.
Some investors and analysts say they think the tumult in the markets could complicate the Federal Reserve’s plans to raise interest rates.
“The Chinese have created an air of fragility around the globe. Markets will now surely have to firm up considerably for the Fed to pull the trigger next month,” said Deutsche Bank analyst Jim Reid.
Ultralow interest rates have fueled a big rally in stock markets since the financial crisis. On Wednesday, minutes of the Fed’s latest policy meeting showed officials were divided over when to raise rates, with some citing concerns over China’s economy as a reason to hold back.
But a delay in lifting rates may bring little comfort to investors if slowing global growth is underpinning the Fed’s caution.
Paul O’Connor, a senior fund manager at Henderson Global Investors, which manages £82 billion ($129 billion) in assets, said he has been selling stocks and buying bonds in recent months, fearing further spillover from the recent Chinese selloff.
“Is there a buying opportunity in stuff that has got beaten up, or will it start to erode confidence in developed market assets? We’re in the latter camp,” he said.
Global equities suffered $8.3 billion of outflows in the week ended Thursday, representing the worst week in almost four months, according to data from Bank of America Merrill Lynch published Friday. Losses were particularly heavy in the emerging markets and the U.S.
The recent rout in commodity markets continued Friday as fears over waning Chinese demand intensified.
Oil prices extended their recent declines. Brent crude oil, the global benchmark, fell 2.5% to around $45.48 a barrel, its lowest level since January. The U.S. benchmark fell 2.4% to $40.32.
Industrial metals prices also fell as the Chinese data reignited worries about the future pace of demand from the world’s top consumer.
The London Metal Exchange’s three-month copper contract was down 1.2% at $5,057 a metric ton in afternoon European trade. Earlier it fell to as low as $4,992.50 a ton, just $16 above Wednesday’s six-year low.
“Commodity markets are telling us this is quite serious,” said Neil Dwane, head of European equities at Allianz Global Investors, which oversees €412 billion ($463 billion) of assets.
An investor walks past monitors showing stock market movements at a brokerage house in Shanghai earlier this week. ENLARGE
An investor walks past monitors showing stock market movements at a brokerage house in Shanghai earlier this week. Photo: Agence France-Presse/Getty Images
—Chiara Albanese, Christopher Whittall, Josie Cox and Ese Erheriene contributed to this article.
Write to Tommy Stubbington at
tommy.stubbington@wsj.com