Another disappointing start to the week following a rough trading session in China
China’s benchmark Shanghai stock index closed down 5.33pc today, as investors continued to worry over the state of the world’s second largest economy, which is already responsible for sparking a rout across global markets at the start of the year.
After enjoying some minor relief on Friday, the region’s trading floors were once again swathed in red as panicking investors dumped equities while oil prices also headed south, sitting around 12-year lows.
The Shanghai Composite Index plunged 5.33pc while the Shenzhen Composite Index, which tracks stocks on China’s second exchange, tumbled 6.6pc.
“The market is concerned about China’s financial stability,” Matthew Sherwood, head of investment strategy at asset managers Perpetual in Sydney, told Bloomberg News.
“People are also quite nervous about the Chinese economic outlook. China is certainly slowing on a very gradual path down. A lot of people are fearing a hard landing is in play.”
Craig Erlam, of online currency broker OANDA, said: “The fact that we’ve still seen significant declines in equity markets suggests that sentiment remains very weak despite this stabilisation in the yuan and more may need to be done to bring about a similar response.
“The removal of the circuit breakers – which were ironically installed to shield against rapid market sell-offs but instead encouraged them – does appear to have brought some calm back but as we’ve seen over night, investors still clearly have no confidence in the markets and remain bearish.”
On Saturday official figures showed Chinese consumer prices picked up slightly in December but inflation remained about half the government’s target.
Prices paid at the factory gate, a guide to future inflation, also sank for a 46th consecutive month.
The figures are the latest highlighting the weakness in China, which is expected to have grown in 2015 at its slowest rate in a quarter of a century.
Investors extended losses from last week, which was one of the worst starts to a year on record with dealers rattled after trade was suspended twice in four days in Chinese markets. Shanghai ended the week about 10pc lower, in echoes of a sell-off that fuelled global turmoil in the summer.
London lost 5.3pc over the week, Paris shed 6.5pc and Frankfurt dropped 8.3pc.
And on Wall Street, the Dow and S&P 500 lost about 6pc, marking the worst opening week of a year in the history of either index.
A series of cuts in the yuan currency’s value to a five-year low against the dollar added to the sense of nervousness as Beijing stood accused of bungling its handling of the crisis.
On Friday the central People’s Bank of China sought to soothe nerves by pledging to carry out “prudent” monetary policy and work to ensure “reasonably abundant liquidity” in the banking system this year.
“Chinese equities have had a tough start to the year. This has flowed around the globe, kneecapping equities, where valuations were already deemed to be stretched,” Mark Smith, a senior economist in Auckland at ANZ Bank New Zealand, said.
“A weaker inflation outlook and heightened market volatility has also swung the pendulum back to more policy support.”
Photo: ALAMYOil prices have also continued to slump on persistent worries about China’s growth slowdown and a supply glut, although analysts said tensions between producer giants Iran and Saudi Arabia could provide some support.
US benchmark West Texas Intermediate for February delivery was down 65 cents at $32.51 in early trading this morning, while Brent was down 75 cents at $32.80.
Both slid about 10pc last week to 12-year lows as global markets were hammered by concerns about China, which overshadowed a strong US jobs report.
Sanjeev Gupta, head of the Asia-Pacific Oil and Gas practice at professional services organisation EY in Singapore, said: “Rising tensions between Saudi Arabia and Iran could support the upswing of oil prices in the short term.”
But he added that oil markets would be closely tracking new economic data from Europe and China, and “further signs of a slowdown will put further downward pressure on the price of crude”.
On Sunday top Arab diplomats rallied behind Saudi Arabia in a dispute with Iran that has threatened to derail efforts to resolve Middle East conflicts including the war in Syria.
The row between the two major oil producers erupted on January 2 after Saudi Arabia executed a prominent Shiite cleric along with 46 others on terrorism charges.
Meanwhile, worries about the global outlook have pushed up the price of gold, which is considered a safe investment in times of uncertainty. The precious metal, which is up more than three percent so far this year, bought $1,105 an ounce Monday.