Visitors pass a sign inside the London Stock Exchange headquarters. The benchmark FTSE 100 index of major companies slid 1.13% to 6,505.13 points yesterday.
AFP
London
European stock markets sank yesterday as investors reacted to the biggest one-day plunge in Chinese equities in more than eight years.
Markets meanwhile awaited this week’s monetary policy meeting of the US Federal Reserve for a handle on its plans for interest rates.
London’s benchmark FTSE 100 index of major companies slid 1.13% to close at 6,505.13 points.
In the eurozone, the CAC 40 in Paris fell 2.57% to end the day at 4,927.60 points, while Frankfurt’s DAX 30 lost 2.56% to finish at 11,056.40 points
“The collapse in the Chinese market is worrying for two reasons: it pulls the other markets lower due to short-term sentiment, but more importantly it sends a message that the second-largest economy in the world is starting to stall,” IG analyst David Madden told AFP.
“The Chinese authorities have been doing their utmost to prop up the market but to no avail, and now after a series of sharp declines traders know the party is over.”
“Global equity markets have not fully factored in the Chinese meltdown, and the worst is yet to come as the Asian powerhouse slows down,” Madden said.
Chinese markets suffered a second straight day of selling on increasing fears about the state of the mainland economy after a gauge of manufacturing activity fell in July to its lowest level in 15 months.
And on Monday figures showed profits at the country’s industrial firms slipped 0.3% year-on-year in June.
Shanghai shares plunged 8.48% despite government efforts to prop up the market. The decline was its biggest single-day drop since February 2007, according to Bloomberg News.
Elsewhere in Asia, Hong Kong tanked 3.09%, Tokyo declined 0.95% and Seoul gave up 0.35%, but Sydney added 0.43%.
“The variety of reasons why this latest Chinese plunge has had such an effect on the markets captures the reasons why China itself is such a huge, and worrying, figure in the macro-economic landscape,” said Spreadex analyst Connor Campbell.
The dollar meanwhile remained weak after a disappointing read on the US housing market, as investors await the Federal Reserve’s next monetary policy decision due tomorrow.
In foreign exchange activity in London, the European single currency rose to $1.1111 from $1.0977 late in New York on Friday.
While the Fed is not expected to raise rates this week, dealers are hoping for some forward guidance, with most analysts tipping a hike in either September or December.
Wall Street stocks also dropped yesterday on the crash in Chinese equity markets, with the Dow Jones Industrial Average sliding 0.73% to 17,440.62 points in mid-day trading in New York.
The broad-based S&P 500 fell 0.45% to 2,070.37, while the tech-rich Nasdaq Composite Index slid 0.78% to 5,049.19.
Back in London on Monday, British publisher Pearson topped the fallers after revealing Saturday that it was in talks to sell its 50% stake in The Economist Group.
The announcement comes just two days after Pearson agreed to sell the Financial Times to Japanese media group Nikkei for £844mn ($1.3bn, €1.2bn), saying that it wanted to focus solely on the education publishing sector which accounts for most of its business.
Shares tumbled 4.76% to close at 1,161 pence.
