Shanghai dive leads global stock markets lower

By Yuri Kageyama ,AP

TOKYO — Global stock markets sank Tuesday, led by a plunge in the Shanghai index, after a renewed slump in the price of oil kept investors on edge about the world economy.

Britain’s FTSE 100 slipped 1.4 percent to 5,793.98. France’s CAC-40 fell 1.7 percent in early trading to 4,239.19 and Germany’s DAX lost 1.4 percent to 9,598.50. U.S. shares were set to drift lower, with Dow futures slipping 0.8 percent to 15,692. S&P 500 futures fell 0.7 percent to 1,857.70.

The Shanghai Composite dropped 6.4 percent to finish at 2,749.78, the lowest since December 2014, when the index was beginning a rally that peaked last June. Japan’s Nikkei 225 lost 2.4 percent to 16,708.90. South Korea’s Kospi slipped 1.2 percent to 1,871.69. Hong Kong’s Hang Seng was down 2.6 percent at 18,831.87. Other regional markets were also mostly down.

Plunging oil prices have been hitting profits at energy companies and getting investors worried the fall in energy costs could add to deflationary pressures in major economies. Slower growth in mainland China is one reason for oil prices to fall. The slide also reflects oversupply including new sources of production such as shale oil in the U.S. Oversupply is set to be compounded by the lifting of sanctions on Iran, allowing it resume oil exports.

In mainland China, investors were in near-panic in the absence of a shift in mainland policies and economic fundamentals, according to Chen Yong, market strategist for Lianxun Securities. The approach of the Lunar New Year didn’t help, as players become reluctant to invest for fear of any unexpected sharp falls in overseas markets.

“It’s just another in a long series of slumps that we have seen in this market, and it’s not the last we will see either because the market is still overpriced. And too many people want to get their money out. It’s been a bubble since it began last summer,” said Michael Every, who heads Financial Markets Research, Asia-Pacific, at Rabobank. He expects another 10 percent drop or more in Shanghai shares before things settle down.

Benchmark U.S. crude was down 85 cents at US$29.49 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell US$1.85, or 5.7 percent, to US$30.34 a barrel in New York on Monday. Brent crude, a benchmark for international oils, lost US$1.01 to US$29.49 a barrel in London. It fell US$1.68, or 5.2 percent, to US$30.50 a barrel the previous day.

The U.S. dollar fell to 117.74 yen from 118.23 yen in the previous trading session. The euro inched up to US$1.0870 from US$1.0850.