News Digest

Chinese markets halt trading for the day after shares plunge

Trading on the Shanghai and Shenzhen stock markets has been suspended for the day, after shares plunged by about 7%. The Shanghai Composite Index has fallen to its lowest level in nearly three months, on what was the first trading day of 2016. An earlier 15-minute break in trading, when shares had fallen by more than 5%, failed to stem the slump. This is the first time that a new “circuit breaker” system - designed to curb volatility in Chinese stock markets - has been triggered, and trading ended 90 minutes earlier than the usual close.

While today’s unofficial manufacturing PMI hints at some further weakness in the manufacturing sector, other indicators suggest that the economy as a whole held up reasonably well last month.

Analysts at Capital Economics

Poor Chinese manufacturing data was believed to be a factor behind the fall. An independent report released early on Monday suggested that factory activity in China has been contracting for 10 consecutive months as of December. Escalating tensions in the Middle East, sparked by Saudi Arabia’s execution of a prominent Shia cleric over the weekend, also led to a jump in oil prices. Financial analysts are also concerned about how the market will react when measures designed to enhance stock market stability expire in the coming days.