...and Wall Street isn’t looking healthy at the moment either. But let’s take this one at a time.
China’s CSI 300 Index had just tumbled 5 percent, triggering a 15-minute trading halt, and stock investors were scrambling to exit before getting locked in by a full-day suspension set to take effect at 7 percent. When the first halt was lifted, the market reaction was swift: it took just seven minutes for losses to reach the limit as volumes surged to their highs of the day.
“Investors rushed to the door during the level-one stage of the circuit breaker as they fretted the market would go down further,” said William Wong, the head of sales trading at Shenwan Hongyuan in Hong Kong.
Spiraling declines on the first day of China’s circuit breakers show how measures meant to help restore calm to one of the world’s most volatile equity markets risk doing just the opposite.
The trigger for China’s crash was a horrible manufacturing report that showed the nation’s manufacturers in the tenth consecutive month of contraction territory.
China’s stock market had stabilized after the summer’s crash, but only because of unprecedented government intervention. The Chinese government went far beyond just banning short selling and government purchases of blocks of stocks, estimate at 5 Trillion Yuan, or 10% of China's GDP.
Ultimately when Beijing created a market when it was the only buyer, it also placed itself in an extremely exposed position.
If investors suspect the state is no longer ready or able to step in, expect Chinese equities to fall fast.
It went as far as arresting stock market traders who sold. For months, there have been stories of CEOs and financial managers that have suddenly vanished..
In other words, China hasn’t had a real stock market since August.
And that started itGlobal stock markets then panicked.
Global equities crumbled toward the worst opening to a year in at least three decades. The Dow Jones Industrial Average sank more than 400 points as data showed U.S. manufacturing sank the fastest in six years, while European equities fell after German inflation unexpectedly slowed. Emerging markets slid the most since August as slowing manufacturing triggered a selloff that halted Shanghai trading. Bonds jumped and the yen rallied on demand for haven assets.
It didn’t help that the Iran-Saudi spat is threatening to get much, much worse.
The Standard & Poor’s 500 Index plunged 2.3 percent, the most since Sept. 28, after the gauge ended 2015 down 0.7 percent.The S&P 500’s decline has it on track for the third-worst start to a year in data compiled by Bloomberg going back to 1927.
New York almost surely won’t crash today, but these losses are serious nonetheless. What is more serious is the fact that our manufacturing sector has slid into recession, along with most of our major trading partners.
I will update this later.