US markets plunge as Chinese economy fears revive global jitters

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World stock markets got off to a rocky start in September closing sharply down on fears that China’s slowing economy will hurt economies across the globe.

In the US all the major indices closed down, the second fall of the week, following similar falls in Europe and Asia. The Dow Jones Industrial Average closed down 2.8% at 469 points, the S&P 500 closed down 2.95% and the Nasdaq down 2.95%. US stocks are on course for their worst performance since the end of 2011.

The sell-off came after more signs of weakness in China’s economy. Data on China’s manufacturing sector suggested output slumped to a three-year low in August. US markets closed down on Monday too, ending their worst August in three years.

Speaking in Indonesia, Christine Lagarde, head of the International Monetary Fund, said the global economy was weaker than the IMF had expected. And the recent spike in “global risk aversion and financial market volatility” could hurt growth in Asia. She said China could cope with the gear change but added other emerging economies would have to be vigilant in order “to handle potential spillovers from China’s slowdown and tightening of global financial conditions”.

“As the Chinese economy is adjusting to a new growth model, growth is slowing –but not sharply, and not unexpectedly. The transition to a more market-based economy and the unwinding of risks built up in recent years is complex and could well be somewhat bumpy. That said, the authorities have the policy tools and financial buffers to manage this transition,” said Lagarde.

The news from China led to a broad sell off around the world. In London the FTSE 100, closed on Monday for a public holiday, fell 189.4 points, or 3.03%, to 6,058.54. Germany’s Dax dropped 2.38% to 10,015.57 and France’s Cac closed 2.4% lower at 4541.16. Japan’s Nikkei had earlier closed down a 3.8% and China’s Shanghai composite index suffered a smaller 1.3% loss.

Powered by article was written by Dominic Rushe in New York, for on Tuesday 1st September 2015 21.16 Europe/ © Guardian News and Media Limited 2010


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