Global Stock Markets Tumble On First Trading Day of 2016

Stock markets around the world got off to a bad start in the first day of trading for the new year, triggered by a sharp drop in China that activated a new “circuit breaker” mechanism that closed trading early to curb losses.

The benchmark Shanghai Composite index plunged 242.92 points or 6.86 percent to 3,296.26. The smaller Shenzen Composite fell 8.2 percent. Japan’s Nikkei Stock Average was down 3 percent, Hong Kong’ s Hang Seng Index fell 2.7 percent and South Korea’s Kospi was down 2.1 percent.

Other markets

European indexes followed Asia lower and by mid-afternoon equity markets in North America were also solidly in the red.

The Dow Jones Industrial Average closed with the biggest loss on the first trading day of the year in 8 years, dropping 276 points.

The S&P 500 suffered its worst first trading day since 2001. Meanwhile, the Nasdaq Composite ended the day down 104.32 points, or 2.1 percent at 4,903.09.

Root of the problem

The trouble started in China after the Caixin/Markit index of Chinese manufacturing fell in December for the 10th consecutive month in the latest sign of weakness in the country.

That triggered the Shanghai composite index plunging of 6.9 percent, which is its lowest level in nearly three months.

Other Asian markets fell sharply as well, as those in Europe, with the DAX in Germany, whose economy is sensitive to developments in China.

Emerging market currencies tumble along with markets

Emerging-market currencies dropped against the dolllar amid plunging global stock markets.

The Brazilian real tumbled 2.6 percent against the dollar to its lowest level since September. The Turkish lira weakened by 2 percent. The Russian ruble and the Mexican peso also declined.

The Chinese yuan fell to its weakest level against the dollar in nearly five years, with no sign that authorities would step in to prop it up as they often have in recent months.