Global shares sink again amid China growth fears

Stock traders look on in the New York Stock Exchange as markets rally, only to fall late in the day (Spencer Platt/Getty Images)

Stock markets around the world endured another day of turmoil as a slew of discouraging economic news and the prospect of higher US interest rates later this month sent shares tumbling.

In London, the blue-chip FTSE 100 index closed down 3 per cent at 6,058.54, while Paris and Frankfurt both dropped 2.4 per cent. In New York, the Dow Jones also ended down nearly 3 per cent, or 469 points, at 16,058, wiping out the gains made at the end of last week’s volatile trading.

Two big pieces of data from China were enough to give sellers the upper hand once again. The country’s official purchasing managers’ index, one of the few reliable indicators of economic activity in China, fell to 49.7 in August, with a figure below 50 indicating a contraction in the economy. A similar measure, the Caixin China manufacturing purchasing managers’ index, fell to its lowest level since March 2009. Both numbers were enough to send a chill through the markets.

Equity markets throughout Asia were hardest hit, with the Shanghai Composite down 4.8 per cent in early trading before a late rally saw the index close 2 per cent lower.

The downbeat economic news was not confined to China. South Korean exports fell by a staggering 15 per cent last month in comparison to August 2014. European manufacturing, which has been in a marginal yet clear growth period, contracted.

Meanwhile, a decision on interest rates in the US will come later this month and most economists expect the first rise in the cost of borrowing since 2006.

The sell-off continued what has been a very volatile few weeks for global stocks. China’s economic slowdown, further declines in the price of natural resources and the prospect of higher interest rates in the US combined to create a powerful selling case.

August was one of the worst months in stock market history. According to Standard & Poor’s, 47 out of 48 global markets finished August in the red with a total decline of 6.9 per cent.

Worst-hit in August were markets with significant exposure to China and to the oil and natural resources markets. The Hong Kong market lost 12.4 per cent in August, closely followed by a 12 per cent decline in Singapore.

The Australian market ended the month down by 11.6 per cent.