European Markets Plunge 2.4% on China Slowdown Worries

Lucy Stoeva
04 Jan, 2016
New York City

European markets fell sharply on the first trading day in 2016 amid weak data on Chinese manufacturing and rising tensions in the Middle East. Fiat Chrysler Automobiles plunged 35% after the company spun off Ferrari. Nokia and Alcatel-Lucent won a regulatory approval for merger.

[R]4:00 PM Frankfurt – European markets fell sharply on the first trading day in 2016 amid weak data on Chinese manufacturing, increasing tensions in the Middle East and volatile oil prices. Fiat Chrysler Automobiles plunged 35% after the company spun off Ferrari. Nokia and Alcatel-Lucent won a regulatory approval for merger.[/R]

European bourses plunged on the first trading day of 2016 as concerns about growth in China and tensions in the Middle East offset positive manufacturing data in December.

The private survey conducted by Markit showed purchasing managers’ index for the euro zone showed the strongest growth since April 2014. The index increased to 53.2 in December, up from 52.8 in November.

In Germany, inflation remained weak in December despite the efforts of the European Central Bank to stimulate growth and inflation.

Consumer prices fell 0.1% from the previous month and rose 0.3% on an annual basis, the Federal Statistics Office in Wiesbaden said.

Both inflation measures were well below economist expectations.

Brent crude oil prices jumped almost 3% in early trading but later retreated to around $37 a barrel as tension between Saudi Arabia and Iran rose.

During the weekend, Saudi Arabia severed diplomatic ties with Iran, following attacks on its embassy in Tehran by protestors against the execution of Shiite Muslim cleric Nemer al-Nemer.

In Asia, the China Shanghai Composite Index dropped 6.7% due to disappointing manufacturing data, while the Shenzhen Composite lost more than 8%, and trading was suspended.

China's manufacturing contracted for the tenth straight month in December and the decline accelerated, according to a private survey data released on Monday.

Gold prices jumped more than 1% as the uncertainty on global markets prompted a search for safety.

In London trading, FTSE 100 index fell 144.43 or 2.31% to 6,097.89 and in Frankfurt the DAX index decreased 417.24 or 3.9% to 10,326.16.

In Paris, CAC 40 index slipped 112.62 or 2.43% to 4,524.44.

In Italy, shares of Fiat Chrysler Automobiles NV plunged 35% to €8.4 after the auto company spun off the luxury car unit Ferrari NV and began trading on Milan Stock Exchange at €43.

French conglomerate Bouygues SA gained 1.8% to €37.2 on media reports that the telecom unit is in merger talks to be sold to Orange for about €10 billion.

Shire PLC tumbled 3.8% to 4,520 pence on rumors that the pharmaceutical company is close to completing a takeover of U.S. rival Baxalta Inc.

Randgold Resources Ltd climbed 2.7% to 4,253 pence after precious metals and energy prices soared on the rising tensions in the Middle East.

Nokia Corp gained 0.5% to €6.63 and Alcatel-Lucent lost 0.22% to €3.64 after the French authorities approved the merger between the two telecom equipment makers.