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Stocks pare losses after 1,000-point Dow plunge

Published:Monday | August 24, 2015 | 12:46 PMAP

US investors got a serious jolt Monday when the Dow Jones Industrial Average tumbled 1,000 points minutes after the market opened in a wave of selling that circled the globe after a historic plunge in Chinese stocks.

Though the declines eased significantly as the morning went on, it sent a shiver of fear through Americans with retirement accounts or saving to buy a home that the bull market is over.

The Dow fell 588.47 points, or 3.6 per cent, to close at 15,871.28. The S&P 500 index slid 77.68 points, or 3.9 per cent, to 1,893.21. The Nasdaq composite shed 179.79 points, or 3.8 per cent, to 4,526.25 points. The three indices are down for the year.

The Standard & Poor's 500 index briefly slid into correction territory after the opening Wall Street jargon for a drop of 10 per cent or more from a recent peak. The last market correction was four years ago. Treasuries surged as investors bought less risky assets.

The Dow fell 1,089 points within the first four minutes of trading as traders dumped shares. But the fire sale was short-lived. A wave buying cut the Dow's losses by half just five minutes later.

Heightened concern about a slowdown in China had already shaken markets around the world on Friday, driving the US stock market sharply lower. A big sell-off in Chinese stocks on Monday caused the rout to continue.

China's main index sank 8.5 per cent amid fears over the health of the world's second-largest economy.

Oil prices, commodities and the currencies of many developing countries also tumbled on concerns that a sharp slowdown in China might hurt economic growth around the globe.

In Europe, Germany's DAX fell 4.7 per cent, while the CAC-40 in France slid 5.4 per cent. The FTSE 100 index of leading British shares dropped 4.7 per cent.


biggest percentage decline


The Shanghai index suffered its biggest percentage decline since February 2007, with many China-listed companies hitting their 10 percent downside limits. The benchmark has lost all of its gains for 2015, though it is still more than 40 per cent above its level a year ago.

Underlying the gloom in China is the growing conviction that policymakers and regulators may lack the means to stem the losses in that nation. The country is facing a slowdown in economic growth, the banking system is short of cash and investors are pulling money out of the country, experts note.

"There is a lot of fear in the markets," said Bernard Aw, market strategist at IG.

China's dimming outlook is drawing calls for more economic stimulus from Beijing, though earlier government efforts to stop the sell-off in stocks appear to have done little to stabilise markets.

The bloodletting spread across Asia earlier, where Japan's Nikkei fell 4.6 per cent, its worst one-day drop since in over two and a half years. Hong Kong's Hang Seng index fell 5.2 per cent, Australia's S&P ASX/200 slid 4.1 per cent and South Korea's Kospi lost 2.5 per cent.

Those declines followed tumbles over the weekend in emerging markets such as Egypt, Dubai and Saudi Arabia.

The panic has underscored the scale of the challenge for Chinese leaders in seeking to curb excess investment and guide the economy towards a more sustainable pace of growth.

"My biggest concern is that global growth momentum is very fragile. The most important step is to see China take further action to try to bring their economy to a seven per cent growth path," said Rajiv Biswas, Asia-Pacific chief economist for IHS.

In commodity markets, benchmark US crude dropped US$2.21, to US$38.24 a barrel in New York. It fell 87 cents a barrel on Friday. Brent crude, a benchmark for international oils used by many US refineries, fell US$2.50 to US$42.96 a barrel.