Fears over China’s economy sent stock markets tumbling worldwide on Monday, the first trading day of the year.
The selloff was sparked by a new report showing China’s manufacturing sector contracted during the end of 2015, according to CNN Money. The Shanghai Composite index plummeted nearly 7 percent for the day before trading was halted, while the Dow Jones Industrial Average and Nasdaq fell over two percent on Monday morning.
Dow drops 360 points shortly after opening. Traders worried about China’s economy. https://t.co/VbOADKzswt
— CNN Breaking News (@cnnbrk) January 4, 2016
“Even though the manufacturing report was disappointing, it’s just the latest sign of a slowdown in China. Analysts said selling in Chinese markets was also driven by other factors, including the scheduled lifting of bans on IPOs (public offerings) and sales by larger investors,” CNN reported.
“With headwinds both domestic and external, investors feared a hard landing may be inevitable and rushed to the exits,” Emma Dinsmore, CEO of R-Squared Macro Management, wrote in a client note.
“More fluctuations in global markets are expected now that the U.S. Federal Reserve has started raising interest rates. The government needs to pay more attention to external risk factors in the short term and fine-tune macroeconomic policies accordingly so the economy does not fall off a cliff,” Caixin chief economists He Fan said, according to Business Insider.
Another source for concern with investors is the volatility in the oil markets caused by rising tensions in the Middle East. Oil prices spiked 3.5 percent after news that Saudi Arabia (the world’s second largest oil producer) was severing diplomatic ties with Iran.