Stock markets worldwide fell Monday morning, the first trading day of 2016, over worries about China’s economy and Middle East instability. In the opening minutes of trading in New York, the S&P 500-stock index fell 1.8% and the Dow Jones industrial average fell more than 2%.
Trading was halted Monday in China after the benchmark Shanghai Composite fell 6.9% and the Shenzhen Composite lost more than 8%, the country’s first use of a “circuit breaker,” which halts trading to avoid further losses.
China has been the stage for major expansions by several retailers, thanks to a burgeoning middle class, and many worry that a slowdown in its economy, the world’s second largest, could spell trouble.
Monday's troubles belie the fact that China's economy overall is quite healthy, relative to economies worldwide. October retail sales in China rose 11%, the fastest expansion of 2015 and just above expectations, according to the National Bureau of Statistics, China. Sales of mobile phones, building supplies, and household products helped boost that number, a continued sign that China is heading to a consumption-led economy rather than a manufacturing one.
Still, Monday’s sell-off was a surprise and is leading some to wonder about continued growth in China as its manufacturing base appears to be shrinking more quickly than previously thought.
"I didn't see that coming!" Kit Juckes, a strategist at Societe Generale, told CNN. "A dreadful start to the New Year for global market sentiment has seen circuit-breakers in action in the Chinese equity market and high-beta currencies falling across the board.”
To be sure, because China’s growth remains healthy, even Monday’s bleak morning isn’t necessarily a sign of serious trouble, some say.
"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 said.