On 21 August, 2015 – China growth concerns drag stocks lower

Global stocks swooned Friday (and on the week) on China growth fears.
United States
US stocks tumbled with the S&P suffering its biggest daily percentage drop in nearly four years. At the same time the Dow Jones industrials confirmed it had entered into correction territory as fears of a China-led global slowdown rattled investors globally. The Dow was down 3.1% (5.8% on the week), the S&P lost 3.2% (also 5.8% on the week) and the Nasdaq retreated 3.5% (6.8% on the week). The continued sell-off partly reflected the recent downward momentum for the markets, which came amid overarching concerns about developing economies and the outlook for US interest rates. Overall trading activity was somewhat subdued on a summer Friday in late August, potentially exaggerating the downward move by the markets.
A report overnight showed China’s manufacturing sector contracted at the fastest pace since 2009, exacerbating worries about the health of its economy and whether the government would take further steps to stem its slowdown. Some analysts think the selling was overdone.
Apple was down as investors continued to fret over its prospects in China, a key market for the iPhone maker. Intuit helped to lead the software sector lower, with the tax software developer plummeting after reporting its quarterly results. Energy stocks also moved sharply lower along with the price of oil, while retail, internet, gold and steel stocks also saw notable weakness.
Gold at the afternoon London fixing was up US$8.80 to US$1,156.50. Copper futures were down 0.8% to US$2.30. WTI spot crude was down 87 US cents to US$40.45. Dated Brent spot crude was down US$1.16 to US$45.46. The US dollar was up against the Canadian and Australian dollars. It was virtually unchanged against the pound. However, it declined against the euro, yen and the Swiss franc. The Dollar Index dropped 1.2%. The yield on US Treasury 30 year bond was down 3 basis points to 2.72% while the yield on the 10 year note was down 4 basis points to 2.04%.
Europe
Stocks plummeted Friday and capped the weakest trading week so far in 2015. Investor concerns over an upcoming snap election in Greece and the continued sell-off in the Chinese stock market dampened sentiment. The FTSE dropped 2.8% and 5.5% on the week. The CAC declined 3.2% and 6.6%. The DAX lost 2.9% and 7.8%. The SMI retreated 3.4% and 5.9% on the week.
The DAX contains lots of auto makers and industrial firms that rely heavily on Chinese demand. Many have seen sharp drops since China’s surprise currency devaluation. A slowing economy and a weaker yuan reduce Chinese purchasing power, while the slide in the currency also makes the country’s exports more competitive.
Greek Prime Minister Alexis Tsipras tendered his resignation late Thursday, paving the way for snap election which is expected to be held on September 20. Tsipras said he felt a moral obligation to place the third bail-out deal in front of the people to allow them to judge both what he achieved and his mistakes. The move by Tsipras is seen as an attempt to quell a rebellion in his leftist Syriza party. Rebel MPs of the ruling Syriza party have decided to leave it and form a new party.
Deutsche Lufthansa sank. Fresenius and Fresenius Medical Care along with Merck and Bayer all finished lower. RWE and E.ON retreated. Airbus and Peugeot declined. Banks including Société Générale, BNP Paribas and Crédit Agricole were lower. In London, Shire and Hikma Pharmaceuticals were down. EasyJet and Carnival slid.
Asia Pacific
Asian stocks extended recent losses to hit multi-month lows Friday, as weak Chinese manufacturing data added to worries that the Chinese government does not have the tools to avoid a “hard landing” which could hurt world growth. While the yuan held steady, weakening economic data, rising capital outflows and signs that Chinese leaders are concerned about the country’s growth prospects raised many questions and fears about the future growth prospects in the economy.
The Shanghai Composite plunged 4.3% on the day and 11.5% on the week. The manufacturing sector continued to struggle in August as the contraction accelerated. According to a preliminary survey, manufacturing PMI contracted with a reading of 47.1, down from 47.8 in July and representing a 77-month low. New orders decreased at a faster rate, as did new export orders, employment, output prices, stocks of purchases and quantity of purchases. The Hang Seng retreated 1.5% to 22,409.62, its lowest level since May 2014. On the week, the index lost 6.6%.
The Nikkei hit a six week low, with export oriented stocks succumbing to selling pressure as the dollar fell to its lowest level in nearly six weeks against the yen in response to the sluggish data out of China. The Nikkei dropped 3.0% to finish at 19,435.83 — its lowest level in over three months. Among the companies that declined were Sharp, Panasonic, Honda Motor, Hitachi, Sony, Nikon and Mazda Motor. Mitsubishi UFJ Financial Group, Fast Retailing and Softbank also retreated.
The S&P/ASX was down 1.4% and the All Ordinaries lost 1.3%. On the week, the former was down 2.6% and the latter, 2.5%. The weak Chinese factory activity data weighed on the market. Both miners and banks were down. The Kospi dropped 2.0% on the day and 5.4% on the week as global economic uncertainties coupled with heightening military tension along the Korean Peninsula rattled investors. The Sensex was down 0.9% and 2.5% on the week on sustained capital outflows by foreign funds as weak manufacturing data from China and another sell-off in its stock markets added to worries about the country.
Global Stock Market Recap

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
Tuesday — Germany posts second estimate of second quarter GDP and August Ifo survey. In the US, June house prices will be reported by FHFA and S&P/Case Shiller. July new home sales are on tap along with August consumer confidence.
Wednesday — UK August CBI distributive trades will be released. In the US, July durable goods orders are on tap.
Thursday — Australia’s second quarter private new capital expenditures will be released. Swiss and US second quarter gross domestic product will be posted. Eurozone M3 money supply will be released. Also in the US, second quarter corporate profits and July pending home sales along with the weekly jobless claims, money supply and Fed balance sheet will be released.
Friday — Japan posts July unemployment, consumer prices, household spending and retail sales. France releases July producer price index and Germany posts preliminary August consumer prices. The UK posts its second estimate of second quarter GDP. The Eurozone reports August economic sentiment. In the US, July personal income and spending will be reported along with final August consumer sentiment.
*Note — all releases are listed in local time.