Chinese markets plummeted 7 percent on Monday — sending shock waves around the world and pushing European markets into the red and signaling a 300-point drop at the open for the Dow Jones industrial average.
Stocks in China fell after forecasts for growth in the giant Asian economy showed 2016 could be its weakest in 25 years.
Rising tensions in the Middle East added to the gloom. Oil prices were whip-sawed, first spiking more than $1 to $38.50 because of the tension and then giving back some of those gains because of the concern over China.
Manufacturing surveys showed Chinese factory activity contracted for a 10th straight month in December. The pace of the slowdown in December was greater than in November.
At 9 a.m., Dow futures were down 335 points, or 1.9 percent.
The pan-European FTSEurofirst 300 index fell 2.5 percent and the euro zone’s blue-chip Euro STOXX 50 index declined by 2.9 percent. Germany’s DAX dropped 3.7 percent.
China’s central bank reacted to the slowing manufacturing output by fixing the yuan at a 4¹/₂-year low.
The losses in Europe and the US mirrored the move in MSCI’s broadest index of Asia-Pacific shares outside Japan , which posted its biggest loss since Aug. 24 last year.
“(Equity) investors are not going to like the start of this year, particularly when you have news that trading was halted in China due to a market sell-off,” Naeem Aslam, chief market analyst at AvaTrade, told Reuters.
Investors are wondering how much further the Federal Reserve will raise rates this year after last month’s rate increase, the first in almost a decade.
An immediate focus will be on Monday’s ISM survey of US manufacturing. The survey is expected to show manufacturing is still contracting after reaching a 6 1/2-year low in November.
