China, Asian Markets Off to Shaky Start–Update

Dow Jones Business news:

Shares in China fell sharply early Monday, following a global rout last week that centred on worries about the Chinese economy and falling Yuan.

The Shanghai Composite Index fell 2.5% to 3106.99, while the Shenzhen Composite Index 3.3% after a modest recovery from Friday.

Australia’s benchmark S&P/ASX 200 was down 1.8%, and South Korea’s Kospi fell 0.9%. Japan’s market was closed for national holiday.

Matt Felsman, a private wealth adviser at APP Securities, said investors remain concerned about China, falling commodity prices and geopolitical risks.

“The main issues remain a tsunami of negative psychology driven by growth concerns in the Chinese economy, crude oil prices plunging to 12-year lows reviving fears that indebted energy producers won’t be able to remain solvent, North Korea testing nuclear weapons heightening geopolitical worries, alongside Middle East tensions between Iran and Saudi Arabia,” he said.

China’s stock market is off to a rocky start after the Shanghai Composite Index lost 10% last week. The mainland market, Shanghai and Shenzhen combined, lost as much as 7.4 trillion yen (US$1.1 trillion) Monday through Thursday, and twice shut early after volatile trading triggered a circuit breaker system.

Analysts and traders attributed gains Friday to building optimism about a steadying Chinese Yuan and measures from Chinese authorities to quell volatility, including a suspension of a the circuit breaker system that exacerbated selling earlier in the week. The Shanghai Composite Index finished up 2% Friday, while the Hang Seng Index was up 0.6%.

U.S. and European stocks stumbled into the New Year, with the Dow Jones Industrial Average losing 6.2% last week, its worst-ever five day start to a year. The Stoxx Europe 600 fell 6.7%, its largest one-week percentage fall since 2011.

Earlier Monday, China’s central bank fixed the yuan at 6.5626 against the U.S. dollar, guiding the currency stronger from its 6.5636 fixing on Friday. It was the second day the bank guided the Yuan stronger, after eight sessions of weaker guidance. The onshore yuan can trade up or down 2% from the fix. Late Friday, it traded at 6.5938 and reached a five-year low, at 6.5956 on Thursday.

The Yuan trading freely in the offshore market was at 6.886 to the U.S. dollar, compared with 6.6820 late Friday. It reached a five-year low of 6.7511 on Thursday.

The Japanese yen last traded at Yen117.12 per U.S. dollar, 0.3% stronger than its level late Friday in Asia and its strongest in about four months.

Gold prices were up 0.8% at $1,106.90 a troy ounce.

Brent crude oil was down 1.8% at $33.31 a barrel.