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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 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 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 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 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. | |
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.” |