China concerns fuel fresh global stock selloff

September 02, 2015 09:05
Chinese manufacturing data has added to fears of a deepening slowdown in the world's second biggest economy. Photo: Bloomberg

Stock markets worldwide got off to a dismal start in September, adding to the steep losses suffered in the previous month, amid renewed concerns over China’s economic slowdown and its potential impact on global growth.

Official figures released Tuesday showed China's purchasing-managers index, a key gauge of factory activity, slumping to a three-year low in August. 

The data fueled fresh worries that the world's second largest economy is failing to gain momentum despite various government support measures, including several interest rate cuts.

The worries over China sparked a selloff in equity markets in Asia and Europe, before spilling over to Wall Street, where some poor US manufacturing data also weighed on investors' minds.

The Dow Jones Industrial Average tumbled 469.68 points, or 2.8 percent, to 16,058.35 on Tuesday, with all its 30 component stocks ending in the red. The broader S&P 500 index sank 3 percent to 1,913 points.

It marked the third-biggest daily drop of the year for both the benchmark indexes.

The Nasdaq Composite Index lost 2.9 percent to 4,636.10, slipping into negative territory for 2015.

"The fact we were down in August at a magnitude that is bigger than we have seen in many years rang some alarm bells," Mohannad Aama, managing director of Beam Capital Management in New York, told Reuters.

"The continued uncertainty about China is definitely adding to worries."

The S&P 500 index sank 6.3 percent in August, its worst monthly performance in more than 3 years.

"The problem is, as much as China is the catalyst for this, it’s also that we’re seeing weakness in fundamentals here," Matt Maley, an equity strategist at Miller Tabak & Co in New York, told Bloomberg News.

"A lot of company earnings were hurt by China in the second quarter and it’s only gotten worse. People are losing confidence with the whole situation there breaking down, not just in the stock market but in data as well."

Banks were among the hardest hit on Wall Street Tuesday, while energy shares also took a big knock, ending a four-day rebound.

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