China Sells Off Shares

Paper tiger and all that:

Global equity markets fell sharply on Monday while gold and bonds rose after a 7-percent slide in Chinese shares, sparked by weak economic data, rekindled worries over global growth on the first day of trading in 2016.

Rising tensions in the Middle East also increased demand for safe-haven assets. Crude prices rose above $38 a barrel at one point as some speculated a breakdown in diplomatic ties between Saudi Arabia and Iran could result in oil supply restrictions.

But crude prices then retreated on worries that the weak Chinese data could portend slower global growth, which also hurt Wall Street and sent key indexes down more than 2 percent.

Emerging markets were especially hard-hit by the China data, with MSCI’s index (.MSCIEF) tumbling 3.4 percent, while its all-country world stock index fell 2.47 percent.

On Wall Street, the Dow Jones industrial average (.DJI) fell 423.4 points, or 2.43 percent, to 17,001.63. The S&P 500 (.SPX) slid 47.27 points, or 2.31 percent, to 1,996.67 and the Nasdaq Composite (.IXIC) lost 140.71 points, or 2.81 percent, to 4,866.70.

China’s yuan currency (CNH=D3)(CNY=) hit its lowest in more than four years after the central bank lowered its guidance rate and factory activity contracted for a 10th straight month in December, at a sharper pace than in November.

Stocks in Europe tumbled, with Germany’s DAX index (.GDAXI) closing down 4.28 percent and the pan-European FTSEurofirst 300 index (.FTEU3) falling 2.53 percent at 1,401.16.

The selloff in China triggered a circuit-breaker that suspended equities trading nationwide for the first time and put at risk months of regulatory work to restore market stability.