London: World stocks fell to near two and a half year lows on Monday as a fresh pounding for Chinese markets left Asia at a four-year trough and sent oil and commodity markets sprawling again.
Europe’s main bourses saw a more steady start but investors were still shaky after a torrid session in Asia as doubts continued to mount about Beijing’s ability to manage the world’s second biggest economy.
The absence of Tokyo for a holiday only made liquidity even harder to come by, heightening volatility. Currency markets saw some wild swings with the South African rand collapsing to record lows at one point before bouncing.
Commodities were again on the ropes as Brent crude oil shed 90 cents, or 2.6 per cent, to $32.67 a barrel, while US crude was 74 cents lighter at $32.41 as both hovered near last week’s 12-year lows.
Beijing was again the epicentre of unease as its central bank People’s Bank of China confounded analysts by guiding the yuan’s midpoint rate sharply stronger, a move that might calm concerns about a competitive devaluation but only added to market confusion as to Beijing’s ultimate intent on its currency policy.
The move was an apparent reversal of the midpoint’s recent weakening trend which included the biggest one-day drop in the guidance rate in five months on January 7.
“Understandably, amidst this global markets are selling Chinese policymaker’s ability to control their economy,” said Tapas Strickland, an economist at National Australia Bank.
“The Chinese situation sets the agenda right now in combination with oil prices,” said Hans Peterson global, head of asset allocation at SEB investment management.
The South African currency — rand — hit new record lows against the dollar, reflecting the country’s growing economic crisis as commodity prices fall because of Chinese slowdown.
The Moscow stock exchange dropped by more than four per cent as Russia’s energy-dependent economy reels from low oil prices and slowdown its major trade partner China.
The impact of Shanghai crash in Asia was complete. Hong Kong gave up 2.76 per cent, Taiwan dropped 1.34 per cent, Sydney ended 1.2 per cent lower, Mumbai lost 0.44 per cent, Seoul slipped 1.2 per cent and Singapore was 2.5 per cent off. Tokyo was closed for a public holiday.
Europe, however, was trying its best to shake of the jitters. After an early wobble, the DAX in Germany and France’s CAC climbed more than one per cent and London’s FTSE 100 and Wall Street futures both clawed back into positive territory.
