European markets are set to close with one of the worst first trading days of a year ever recorded. After a huge moves on China overnight, Asian stocks started an avalanche of negativity that swept through the markets leaving Europe and the US powerless to stop the huge falls. Wall Street opened in apocalyptic fashion, with the Dow trading over 450 points lower at one point. Really this has been caused by very little, and in the grand scheme of things we have seen nothing today that we didn’t already know. Chinese manufacturing was the catalyst for the sell off as we saw the print negative for the fifth consecutive month.
New measures to try and stop heavy falls on the Chinese stock markets were bought into force today and they were tested straight away. A fall of 5% triggered an initial 15 minute suspension, a move that was supposed to stop sellers from selling further, however after the market resumed it fell another 2% hitting the second threshold of 7% and suspending the session for the rest of the day. The worrying issue for investors in China will be that further restrictions bought in last year to protect the market from heavy falls are due to be lifted in the coming days, a move that could cause yet more heavy selling of Chinese equities as investors will once again have the ability to trade.
We also saw readings in the Eurozone and UK this morning, with both struggling for any substantial gains. However unlike the Eurozone that at least posted gains in the manufacturing number, the UK missed expectations causing yet more negativity for stocks that had already been struggling. The market in risk off mode as we have started the new year, with China causing concerns as well as the war of words between Saudi Arabia and Iran. The move by the Saudi’s to cut ties with Iran has led oil prices to a much needed rally and has also seen Gold prices move higher as demand for safe havens take hold.
The US open only seemed to exasperate matters with US ISM manufacturing data disappointing leading to further losses. It was a session where everything seemed to push the markets in one direction and because it was a snowball effect that caused such heavy losses we could well be in line for some kind of rebound tomorrow. This was a trading day where markets panicked and were left exposed. Later in the week we will have the non-farm payrolls and jobs report and come 3pm Friday afternoon we may have forgotten all about today as strong jobs numbers clear the way for talks of further rate hikes.