(Australian Associated Press)
GLOBAL MARKETS’ GLOOMY START TO 2016
Global markets fell on Monday on heightened concern about the economy in China, where trade in mainland shares was halted following a seven per cent drop. The selloff followed surveys showing factory activity in the world’s second-largest economy shrank sharply in December. China’s central bank also fixed the yuan at a four-and-a-half-year low.
WHICH MARKETS WERE HIT?
Pretty much all of them. In the US, the S&P 500 and the Nasdaq had their worst starts to a year since 2001 with declines of 1.53 per cent and 2.08 per cent respectively, while the Dow Jones industrial average closed down 1.58 per cent for its worst opening to a year since 2008. London’s FTSE 100 dipped 2.39 per cent, the CAC 40 in Paris dropped 2.47 per cent, and Germany’s DAX 30 slumped 4.28 per cent.
WHY THE GLOOM?
China’s size makes it a bellwether for global markets. A slowing Chinese economy means lower demand for imports, while the devaluation of the yuan weakens the Chinese currency and makes those imports – such as Australian resources – more expensive. On the flip side, the devaluation makes Chinese exports cheaper to the rest of the world, which could be bad news for producers in other countries.
WHAT DOES IT MEAN FOR AUSTRALIA?
The Australian market looks set to continue the gloomy, risk-off trade. The benchmark S&P/ASX200 index was down 0.48 per cent on Monday and, at 0930 AEDT, the March share price index futures contract was down 34 points at 5,218.