Sustained Plunge in Shanghai Worries Global Financial Markets

Nichole Harper
08 Jul, 2015
New York City

World markets and commodities extend losses as Chinese regulators fail to contain the deepening crisis of confidence in Shanghai. Crude oil dropped for the fifth day in a row and approached $51 a barrel in New York trading. In addition, all trading on the NYSE is halted for technical reasons.

[R]1:50 PM – World markets and commodities extend losses as Chinese regulators fail to contain the deepening crisis of confidence in Shanghai and Hong Kong. Crude oil dropped for the fifth day in a row and approached $51 a barrel in New York trading. In addition, all trading on the NYSE is halted for technical reasons.[/R]

World markets declined for the second day after the sustained drop in Chinese stocks extended to commodities and currencies markets around the world.

Indexes in Shanghai declined for the third day this week and deepened losses for the third week in a row as Chinese regulators worked to calm markets unsuccessfully.

The benchmark index in Shanghai is has now dropped more than 30% in the last four weeks, firmly entrenched in the bear territory, and nearly 45% of all list stocks are halted from trading.

Investors are forced to take losses by selling large cap companies after most of the mid and small cap companies have been halted. The vicious selling cycle is only exacerbated as small investors panic sets in and Chinese institutions are reluctant to increase exposure in a falling market.

On Wall Street, Tollbooth Strategy Index slipped 0.9% or 100.87 to 10,602.10.

S&P 500 index dropped 1.1% or 23.80 to 2,057.47 and the Nasdaq Composite Index declined 1.4% or 68.14 to 4,929.71.

Crude oil in New York slipped 66 cents to $51.67 a barrel and gold gained $7.20 to $1,159.80 an ounce.

U.S. Movers

Accenture Plc ((ACN)) decreased 1.2% or $1.20 to $97.48 after the Ireland-based outsourcing and consultancy services provider agreed to acquire Hong Kong-based independent full service digital agencies PacificLink Group to expand in Greater China market.

However, the transaction amount was not disclosed.

BB&T Corporation ((BBT)) fell 26 cents to $40.08 and the financial services provider received Federal Reserve approval to acquire Susquehanna Bancshares Inc for about $2.5 billion.

Under the terms, Susquehanna shareholders will receive 0.253 shares of BB&T and $4.05 in cash per share.

European Markets

European markets rebounded on the hopes that Greece and international may work out an agreement by the end of this weekend.

Greece formally asked for a three-year bailout and said it is ready to implement pension and tax reforms as demanded by lenders.

However, the proposal fell short of details and Prime Minister Alexis Tsipras and newly appointed finance minister Euclid Tsakalotos said the list will be provided to lenders before the Thursday mid-night deadline.

Greek banks are expected to run out of cash as early as tomorrow and without the new cash injection from the European Central Bank, Greece will not be able to meet its bond obligation of €3.5 billion on July 20.

Financial markets rose on the news that Greece made a formal request for a bailout.

In London trading, FTSE 100 index gained 0.9% or 62.59 to 6,494.95 and in Frankfurt the DAX index increased 0.9% or 103.43 to 10,774.24.

In Paris, CAC 40 index jumped 1.1% or 53.73 to 4,658.37.

Air France KLM SA gained 2.8% to €6.01 after the after the France and Holland based airline said passengers traffic in June edged up 0.2% to 8.24 million passengers compared to 8.22 million passengers from a year ago month.

Group load factor in the month increased 0.5 percentage points to 87% from 86.5% and available seat-kilometers, jumped to 26.09 billion from 25.85 billion.

Asian Markets

Markets in Asia plunged and the Nikkei average in Tokyo dropped more than 3% after indexes in China and in Hong Kong deepened month-long losses.

Eight largest markets in Asia plunged and commodities traded at new 2015 lows after Shanghai index declined nearly 7% and the Hang Seng index in Hong Kong dropped 5%.

On the economic front, Japan’s preliminary current account surplus rose in May and trade balance in June declined in after three weeks in June.

The preliminary current account surplus in May jumped to 1.88 trillion yen compared to 1.33 trillion yen surplus in April, the ministry of Finance said.

Separately the ministry said first 20-day’s provisional trade balance for June declined 80.7% to 156.54 billion yen from 811.07 billion yen in the same month a year ago.

The exports in June climbed 10% to 4.32 trillion yen from 3.93 trillion yen while imports dropped 5.5% to 4.48 trillion yen compared to 4.74 trillion yen in a year ago month.

The Nikkei 225 Stock Average declined 638.95 or 3.1% to 19,737.64 and the broader Topix index dropped 54.75 or 3.3% to 1,582.48.

The yen closed at 121.86 against a dollar.

Stocks in Mumbai plunged following an Asia-wide sell-off after Chinese stocks plunged nearly 7% and crisis in Greece continued.

The Asian markets fell at least 1%, with Hong Kong shares plunging over 5%, posting their biggest decline since the financial crisis.

The Shanghai Composite fell as much as 8.2% before closing down 5.9% lower. Japan’s Topix index posted its steepest decline since February 2014, sliding 3.3%. The MSCI Asia Pacific Index fell 3.2% in Hong Kong, set for a correction and heading for a five-month low. Australia’s S&P/ASX 200 Index lost 2%.

Rupee weakened 14 paisa to 63.59 against one U.S. dollar.

The Sensex Index declined 483.97 or 1.7% to close at 27,687.72. The CNX Nifty dropped 147.75 or 1.7% to 8,363.05.

Kazakhstan, the world''s largest producer of uranium, will supply a total of 5,000 tons radioactive fuel to India between 2015 and 2019, Kazakh President Nursultan Nazarbayev said today.

Sensex in Mumbai declined following an Asia-wide sell-off after the Shanghai index plunged 7%. NMDC plans to establish three-million-tons-a- year steel plant in Karnataka.

Saavn, privately held and based in New York music streaming service said it has agreed to a $100 million investment from a private equity fund, valuing the company at least $400 million that has yet to generate profit.