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US stock markets follow global drop over Chinese economy concerns US stock markets follow global drop over Chinese economy concerns
(about 1 hour later)
US stocks dropped sharply on Wednesday following a slide in markets across the world due to concerns about the health of the Chinese economy.US stocks dropped sharply on Wednesday following a slide in markets across the world due to concerns about the health of the Chinese economy.
All the major US stock indices opened lower on Wednesday morning, with the Dow Jones Industrial Average losing 244 points, or 1.39%, to 17,159 points – a six-month low. The Standard & Poor’s 500 down 1.31% and the Nasdaq down 1.42%. All the major US stock indices opened lower on Wednesday morning, with the Dow Jones Industrial Average losing 244 points, or 1.39%, to 17,159 points – a six-month low. The Standard & Poor’s 500 was down 1.31% and the Nasdaq was off 1.42%.
Related: China's currency devaluation could spark 'tidal wave of deflation'Related: China's currency devaluation could spark 'tidal wave of deflation'
Investors worldwide are worried that the world’s second-largest economy may be in worst shape than had been believed after Chinese authorities took the surprise move of devaluing the yuan for the second consecutive day. Investors worldwide are worried that the world’s second-largest economy may be in worse shape than had been believed after Chinese authorities took the surprise move of devaluing the yuan for the second consecutive day.
The yuan hit a four-year low against the dollar on Wednesday, its weakest since August 2011, after the Chinese central bank set the yuan’s daily midpoint even weaker than in Tuesday’s devaluation.The yuan hit a four-year low against the dollar on Wednesday, its weakest since August 2011, after the Chinese central bank set the yuan’s daily midpoint even weaker than in Tuesday’s devaluation.
With the bank having said that Tuesday’s move was a “one-off depreciation”, the rapid drop in the value of China’s currency – about 4% in the past two days – dealt a blow to appetite for risky assets, and markets across the region plunged amid concerns that Beijing has embarked on a damaging currency war. With the bank having said that Tuesday’s move was a “one-off depreciation”, the rapid drop in the value of China’s currency – about 4% in the past two days – dealt a blow to the appetite for risky assets, and markets across the region plunged amid concerns that Beijing has embarked on a damaging currency war.
The US market falls followed slides on stock markets across the world. In China the Shanghai composite lost 1.03%, while the Nikkei fell 1.58% or 327.98 points. The FTSE 100 was down 100 points, or 1.5%, to 6,564 points at 3pm BST (10am ET), Germany’s Dax down 2.67% and France’s Cac off 2.91%. The US market falls followed slides on stock markets around the world. In China the Shanghai composite lost 1.03%, while the Nikkei fell 1.58%, or 327.98 points. The FTSE 100 was down 100 points, or 1.5%, to 6,564 points at 3pm BST (10am ET), Germany’s Dax was down 2.67%, and France’s Cac was off 2.91%.
US companies with the biggest exposures to China were the biggest fallers, with car companies suffering particularly hard. General Motors, Ford and Fiat Chrysler were all down between 1-4.6%. Apple, for whom China is key growth area, was down 2.2% to $110.90 – its lowest in more than six months. US companies with the biggest exposures to China were the biggest fallers, with car companies suffering particularly hard. General Motors, Ford and Fiat Chrysler were all down between 1%-4.6%. Apple, for whom China is key growth area, was down 2.2% to $110.90 – its lowest in more than six months.
Contributing to the Chinese slump were worse than expected economic figures with fixed-asset investment falling short of expectations. The crucial gauge on the country’s growth came in at 11.2% for the first seven months from the same period last year, according to official data. Economists had forecast a rise of 11.5%.Contributing to the Chinese slump were worse than expected economic figures with fixed-asset investment falling short of expectations. The crucial gauge on the country’s growth came in at 11.2% for the first seven months from the same period last year, according to official data. Economists had forecast a rise of 11.5%.
Analyst fear that a slowdown in China’s growth could have a ripple effect on the whole of the global economy.Analyst fear that a slowdown in China’s growth could have a ripple effect on the whole of the global economy.
“China’s currency moves will hurt appetite for risky assets such as equities and commodities,” Rajeev De Mello, head of Asian fixed income at Schroders in Singapore, said.“China’s currency moves will hurt appetite for risky assets such as equities and commodities,” Rajeev De Mello, head of Asian fixed income at Schroders in Singapore, said.
“While it is too early to say whether this is the beginning of a sustained devaluation of the yuan, other central banks may be forced to follow suit and that may trigger a fresh round of currency weakening around the emerging world.”“While it is too early to say whether this is the beginning of a sustained devaluation of the yuan, other central banks may be forced to follow suit and that may trigger a fresh round of currency weakening around the emerging world.”
Rupert Baker, a Mirabaud Securities European equity sales executive, said: “We had a decent run-up but this is all unwinding pretty quickly. A competitive devaluation of currencies is never good.”Rupert Baker, a Mirabaud Securities European equity sales executive, said: “We had a decent run-up but this is all unwinding pretty quickly. A competitive devaluation of currencies is never good.”