Oil prices fall again as investors remain nervous over Chinese regulators’ plans
China’s benchmark Shanghai stock index closed down 5.3% as investors continued to worry over the state of the world’s second-largest economy. Photo: Agence France-Presse/Getty Images
Global stocks were off to a shaky start Monday as intensifying fears about the Chinese economy continued to hit risky assets, building on a bruising first week of the year.
The Shanghai Composite Index fell 5.3% amid deepening concerns that Chinese authorities would be unable to stem the turmoil in its financial markets and broader economy.
Nervousness around China also sent markets in Asia lower across the board as the price of oil tumbled anew. European stocks were little changed.
Chinese officials haven’t adequately explained to investors the reasons behind the decisions to allow their currency to decline in recent days, said Dirk Thiels, head of investment strategy at KBC Asset Management. “It only increases suspicion that maybe something worse is going on [in China’s economy] than people are expecting,” he said, adding that, personally, he doesn’t believe this to be the case.
The Stoxx Europe 600 was flat in early trade after falling 6.7% last week.
Despite a strong U.S. jobs report and relatively upbeat economic releases from Europe last week, “It is difficult to envision a bright outlook for the global economy amid a steeper deceleration in China and lack of aggressive policy response,” strategists at Barclays wrote in a note.
Rapid weakening of China’s currency and volatility in its stock markets last week sparked turmoil in global markets, sending the Dow Industrials down over 1,000 points in the worst-ever opening week for U.S. stocks.
While a weaker currency should support Chinese exports, investors worry that rapid downward adjustments to the yuan could spark a global currency war. More volatility could hit financial markets if investors take the news as a sign that the world’s second-largest economy is slowing faster than expected.