World markets were shaken yesterday by a crash in Chinese stocks and concerns after eurozone leaders set an end-of-week deadline for Greece to produce proposals to secure a loan deal, while commodities’ prices stabilised.
US stocks were down one per cent in early trading after a 6.75 per cent plunge in China shares overnight. Securities regulators there warned investors were being gripped by “panic sentiment” (see page 28).
The yen rose to a six-week high against the dollar as investors sought safe-haven assets. Benchmark copper on the London Metal Exchange was up three per cent after earlier hitting a six-year low of $5,240 a ton on worries about demand in top consumer China.
More than 30 per cent has been knocked off the value of Chinese shares since mid-June, and investors are worried China’s market turmoil could destabilise the global economy.
“Greece and China have been at the forefront of investors’ minds right now, although China is the bigger factor simply because of its size and its role as a global market player,” said Ninh Chung, head of investment strategy and portfolio management at SVB Asset Management in San Francisco.
Minutes from the most recent Federal Reserve meeting also were on tap for US markets.
MSCI’s all-country equities world index lost 0.8 per cent, while the Dow Jones industrial average fell 179.48 points, or 1.01 per cent, to 17,597.43.
The S&P 500 lost 20.61 points, or 0.99 per cent, to 2,060.73 and the Nasdaq Composite dropped 58.00 points, or 1.16 per cent, to 4,939.46.
In Asia, Hong Kong shares dropped eight per cent, and Japan’s Nikkei and stocks in Australia took heavy blows, leaving investors only the yen and safe-haven government bonds for refuge. The yen rose to a six-week high against the dollar.
European shares were up 0.1 per cent and looked on course earlier to snap a four-day losing streak.
In addition to China, eyes are still also on Greece, which made a formal request for a three-yearloan deal from the eurozone rescue fund.
The bloc’s leaders on Tuesday gave Athens until the end of the week to come up with proposals for reforms in return for loans. Without the aid, Greece is likely to crash out of Europe’s single currency.
Against the dollar, the euro was up 0.4 per cent at $1.1053, while the yen gained as much as one per cent versus the greenback to 121.31, its strongest since late May.
Commodity markets, highly exposed to China, were slowly starting to regain their footing.
Oil prices pulled out of their dive, with US crude up 25 cents at $52.58 a barrel and Brent up 74 cents at $57.59. This week is shaping up to be the worst for crude since March.
The sell-off in metals markets also eased. Spot gold was up 0.2 per cent at $1,157.22 an ounce. It earlier had slid to a four-month low of just below $1,150 an ounce.
The Australian dollar, often used as a liquid proxy for China plays, slumped to a six-year low against the US dollar of $0.7389.