Stock markets in Europe tracked heavy losses in China on Monday and the euro made strong gains after more weak economic data from Beijing set a strained tone to trade.
The bout of selling was all the more notable as it followed the worst showing in December seen on European benchmarks in years.
Analysts also said the torrid start to the first full week’s trade of 2016 — which was also redolent of some of the most turbulent days of last year — could prove typical for the year ahead.
Frankfurt’s Xetra Dax 30 led the declines — down 3.6 per cent — with some of its major exporters among the biggest fallers, including carmakers. BMW was the biggest single faller, down 4.7 per cent.
The FTSE 100 in London lost 1.9 per cent. Its resource and financial stocks led the losses, amid nerves about the potential knock-on effects of China’s fractious markets and its deepening economic slowdown.
“China remains seen as a broad threat to global economic stability,” said Tony Cross, market analyst at Trustnet Direct.
“Financial stocks, especially those with higher exposure in the Far East, should expect to struggle in this climate, which is also bad for miners and energy stocks, leaving the FTSE 100’s biggest sectors looking seriously exposed, even after the dark days of last December left them a such historically low levels.”
Some of the main UK index’s worst-performing stocks of 2015 were under the heaviest pressure, confounding any hopes that they could bounce back at the start of the new year.
Anglo American was the biggest single faller, down 7.6 per cent, compounding a 74 per cent fall made over the last calendar year. Glencore, which lost 69 per cent over 2015, was down 6.5 per cent. Standard Chartered, the London-listed bank focused on Asian emerging markets, fell 4.9 per cent. It lost 36 per cent last year.
The Europe-wide Euro Stoxx 600 fell 2.5 per cent to 356.60. January’s fresh fall was all the more notable since it followed a torrid December for Europe’s stock markets, scotching any hopes that the long decline left room for a rally.
The strained feel to trade across global markets left haven currencies in demand.
The euro rose 0.7 per cent to $1.0935, a four-session high.
“I think this morning’s move will be echoed throughout this year, with periodic scares in the market leading people to put money into the euro on expectations that the early stages of the eurozone recovery means the currency has considerable mileage,” said Koon Chow, macro economics and foreign exchange strategist at Union Bancaire Privée.
“That said, there are limits to how far the euro can move up from here against the dollar, because the market already has a benign view on Fed hikes and the risks are skewed, in my view, that expectations of hikes will increase rather than decrease.”
In the meantime, the dollar index, which tracks the world’s reserve currency against a basket of its rivals, fell 0.4 per cent to 98.230.
The yen, a more established haven, also rose, strengthening by 1.1 per cent to Y118.96 per dollar.
Kit Juckes at Société Générale said: “At this time of year, I don’t think it’s wise to go out without an umbrella or a long yen position. Preferably, have both.”
Source: Financial Times