China fresh sell-off sends commodities, markets to the pits

The Shanghai Composite Index fell 8.5% to close at 3,209.91 points, its biggest one-day loss since an 8.8% decline on Feb. 27, 2007. (Image from archives)

Stock markets collapsed on Monday after China’s main index plummeted 8.5% — its steepest fall since the early days of the global financial crisis — amid deepening fears over the health of the world’s second-largest economy.

The drop in China’s equities followed last week’s losses of 11%, and hammered stock prices across Asia and Europe, pushing commodities down as well.

The Shanghai Composite Index fell 8.5% to close at 3,209.91 points, its biggest one-day loss since an 8.8% decline on Feb. 27, 2007. The index is down 38% from its June 12 peak.

Analysts and media were quick to label today’s markets collapse as the Chinese “Black Monday,” in allusion to Monday, October 19, 1987, when a crash in the Hong Kong market spread to Europe, the US and all global stock markets around the world, which shed a huge value in a very short time.

The biggest fallers were mining companies that rely on demand from Chinese manufacturers for their copper, coal, iron ore and other metals. Glencore (LON:GLEN), the giant commodities trader and miner, fell 8%, while Anglo American (LON:AAL) and BHP Billiton (LON:BLT) each lost more than 7% of their value.

Bloomberg’s commodity index of 22 raw materials, from oil to metals, has plummeted to its lowest level in 16 years.

The London Metal Exchange’s three-month copper contract was down 2.3% at $4,936.50 a tonne in midmorning European trade, having dropped to its lowest level since 2009 in earlier trading hitting $4,903 a tonne. It fell below the key $5,000 level for the fifth session in a row.

Aluminum also hit a six-year low during trading at $1,521 a tonne, while zinc hit a five-year low at $1,709 a tonne and lead hit a five-year low at $1,635 a tonne. Oil also tumbled to its weakest levels in 6.5 years to $38.26 a barrel, basis October Nymex futures.

Iron Ore fell below $47 a tonne for the first time in four weeks, according to the Metal Bulletin Index. The drop of nearly $4.50/tonne represents one of the largest the index has seen. The MBIOI-62 also fell heavily, tumbling around 5%, to close at $53.28 per tonne.

Gold was, however, trading modestly higher in early trading in New York. December bullion was last up $6.30 at $1,165.80.

US stock market authorities have been forced to suspend the futures market on the Nasdaq index, as panicking traders have driven it down 5% — the maximum allowed under Wall Street rules.

The Dow Jones Industrial Average lost more than 1,000 points and it was also momentarily halted. It perked back up after that initial drop and was sitting at 16,251 points, down 208.75 points, as of 12:53 p.m. EST. Prior to today, it had never lost more than 800 points in a day.

More than $5 trillion have already been wiped out from the value of global stocks since China unexpectedly devalued the yuan, raising concerns over a global economic slowdown. The panic intensified at the end of last week, when U.S. equities, which had remained relatively stable, tumbled as investors dumped the biggest winners of 2015.