MW: European stocks slammed by Chinese market rout
European stocks were submerged in a sea of red, as a sharp selloff and trading halt in China scared investors out of equities.
The Stoxx Europe 600 index SXXP, -2.40% slumped 2.3% to 357.45 in the first session of the new year, after gaining 6.8% in 2015. All major sectors were in the red, led by basic materials and financial plays.
Equity strategists have generally been optimistic about the outlook for European stock markets in 2016, but the action on the first trading day of 2016 was exactly the opposite. All regional benchmarks were trading firmly lower, most notably Germany’s DAX, in the wake of the plunge in Chinese shares that was fueled in part by disappointing Chinese manufacturing data. Stocks in China at one point dropped almost 7%, triggering a circuit breaker that halted trading on the mainland for the rest of the day.
U.S. stocks also skidded.
“If today’s activity in Chinese equity markets is an indication of the year ahead then we are likely set for a bumpy 2016,” said Brenda Kelly, head analyst at London Capital Group.
Investors are also likely to be watching oil prices, which were pushed higher by rising tensions between Iran and Saudi Arabia.
Read: Saudi Arabia-Iran rift could further disrupt oil prices
Other indexes: Germany’s DAX 30 index DAX, -4.16% was among the hardest hit European indexes, slumping 3.8% to 10,332.44 and on track for its worst session since August.
France’s CAC 40 index PX1, -2.44% gave up 2.2% to 4,534.63, while the U.K.’s FTSE 100 index UKX, -2.16% fell 2.1% to 6,112.03.
Movers: Shares of Fiat Chrysler Automobiles NV FCA, -35.68% plunged 36% after the car maker spun off Ferrari NV. The luxury-car brand started trading as its own company in Milan on Monday morning with an opening share price of 43 euros ($47.02). Ferrari listed on the New York Stock Exchange in October.
Shire PLC SHP, -4.24% SHPG, -2.60% fell 3.5% after speculation the pharmaceutical giant is close to completing a takeover of U.S. rival Baxalta Inc. BXLT, +2.33%
Nokia Corp. NOKIA, -0.30% NOK, +0.43% shares were up 0.4% and Alcatel-Lucent ALU, -1.10% lost 0.2% after French authorities gave the go-ahead to a merger between the two telecom-equipment suppliers.
Data: The final eurozone manufacturing purchasing managers index showed factories in the currency bloc ended 2015 with the strongest growth since April 2014. The PMI came in at 53.2, up from 52.8 in November and slightly above the earlier flash estimate of 53.1.
The flash reading on German inflation showed consumer prices rose just 0.2% in December year-over-year, missing analyst expectations and remaining far from the European Central Bank’s target of just below 2%.
The eurozone-wide inflation reading for December comes Tuesday. It will be released at 10 a.m. London time, or 5 a.m. Eastern Time.
