European and US stocks fell for the third time in four days, mirroring declines that shook global equities in August, as they extended the worst start to a year since 2000 amid a China-fuelled selloff in mining and energy shares.
Comments by billionaire George Soros exacerbated market jitters after he told an economic forum in Sri Lanka yesterday that global markets are facing a crisis and investors need to be very cautious.
European equities tumbled 5.4% in the first four days of the year, and companies with the most sales in the world’s second-biggest economy are bearing the brunt.
Anglo American and Glencore slid 7.1% or more yesterday, pushing a gauge of miners to its lowest level since 2009. Car makers fell to an almost three-month low.
A flight from risky assets in the first week of the new year has wiped $2.5 trillion (€2.23tn) from global equities, made worse by China’s central bank cutting its yuan reference rate for an eighth straight day.
China’s tolerance for a weaker yuan is being seen as evidence policy makers are struggling to revive an economy that’s the world’s biggest consumer of energy, metals and grains.
The yuan’s reference rate exacerbated concern that growth in China is slowing more than previously forecast.
The declines are a setback for European equity bulls who had speculated that central bank stimulus and a slowly improving economy would insulate the region from stress in Asia and North America.
The move revived the angst that sent financial markets into turmoil last summer, driving US stocks to three-month lows on Wednesday in a sell-off led by commodity producers.
“The Chinese economic outlook is getting bleaker,” said Daniel Weston, chief investment officer of Aimed Capital in Munich.
“Chinese demand for European exports is weakening and the price of European goods and services is getting costlier for the Chinese. In August, the Chinese said it would be a ‘one off’ devaluation, but now the market knows it is much more than that.”
The Stoxx Europe 600 Index fell as much as 3.6% after a rout in China triggered a trading halt in the CSI 300 Index.
Europe’s benchmark slid 2.3% at 3.23pm in London, paring an earlier drop after China’s securities regulator suspended the circuit-breaker that forced local exchanges to shut early.
Germany’s DAX Index lost 2.7% to 9,940.73, trading below 10,000 for the first time since October.
The Stoxx 600 is on track for its worst week since August, when China’s yuan devaluation sparked a selloff that saw Europe’s benchmark plunge as much as 18% from its record.
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