User:Oceanflynn/sandbox/January 4, 2016 global stock market sell-off

A January 4, 2016 global stock market sell-off with stock markets in China falling to the point of triggering its new trading curb for the first time was fueled by the most recent report by Caixin on China's Purchasing Managers' Index (PMI) reading which showed that China's manufacturing activity had slowed again in December 2015 to a PMI reading of 48.2 - with anything below 50 indicating deceleration. Since China is the world's largest metal consumer and producer, and "the world’s second largest economy", the China PMI is closely watched. By 3:22 Monday in New York the "Dow Jones Industrial Average had fallen 2.2%, the "S&P 2.1%, and Nasdaq Composite 2.6%," pan-European Stoxx Europe 600 index 2.5%, Shanghai Composite Index 6.9% and the "Vanguard FTSE Emerging Markets Exchange-Traded Fund lost 3.3%." US stocks such as Netflix fell by 6%, Alphabet 3.9% and Facebook 3.9%. "The Brazilian real fell 2% against the dollar and Brazilian equities dropped 1.6% to 42,646.19, its lowest since March 16, 2007."

Data from surveys compiled by the financial information firm, Markit Group showed that 48.2 in December, 2015 down from 48.6 in November, 48.3 in October, September is 50.5 and 51.5 in August. The October report was encouraging but the December report dampened hopes for recovery and triggered fears for China's overall economy. and markets around the world responded. China's CMI had fallen to 48.2 from 48.6 in November, 48.3 in October, 50.5 in September and 51.5 in August.

On Friday, January 1, 2016 The Guardian reported that China's factory activity continued to decline, overseas demand for goods fell and export orders for Chinese manufacturers fell. Stock markets which had already responded by mid-December with "metals [experiencing] a broad-based drop on the weakness of manufacturing activity in China, According to the Institute for Supply Management (ISM), which conducts PMIs, the US had a PMI of 48.6 in November from 50.1 in October. Whereas China has experienced a gradual decline since late 2014, the United States last decline was in November 2012.

In October 2015 Caixin China General Services PMI reported that "Chinese business activity [had declined]" at its "quickest rate since start of 2009.

""In the group of non-energy commodities, metals experienced a broad-based drop on the weakness of manufacturing activity in China while agriculture prices were also generally down. Precious metals showed their largest drop since 2013 on firmer expectations of interest rate hikes in the US."

- "OECD December 2015

"A private survey showed that factory activity in China, the world's biggest metals consumer, contracted for the 10th straight month in December and at a sharper pace than in November, dampening hopes the Chinese economy would enter 2016 on steadier footing."

China Purchasing Managers Index
""The Caixin PMI is a closely-watched gauge of nationwide manufacturing activity, which focuses on smaller and medium-sized companies, filling a niche that isn't covered by the official data.""

- CNBC January 3, 2016

In August 2015, Caixlin Media Co Ltd announced that the China Purchasing Managers' Index (PMI) had declined to 51.5. This was the beginning of a decline that continued into December 2015. , PMIs are economic indicators derived from monthly surveys of companies is produced by the financial information firm, Markit Group, which compiles the survey and conducts PMIs for over 30 countries worldwide. From 2010 to 2015 HSBC had sponsored Markit's China PMI, but that relationship ended in June and Caixin stepped in.

On January 4, 2016, reports of "weak Chinese economic data reignited fears of a global slowdown" and "U.S. stock indexes tumbled about 2 percent."

During the first fifteen minutes of the first day of trading in the Chinese stock exchange, the stock market fell by 5% before leading regulators halted trading. It was reopened for another fifteen minutes and stocks fell until trading was again halted. Leading regulators let shares fall for another fifteen minutes before ending trading early." "The blue-chip CSI 300 Index dropped 7% while the benchmark Shanghai Composite index fell 6.9%. The technology-heavy Shenzhen Composite was the worst performer and fell by more than 8%."

Context
Chinese stocks began to experience a "period of extreme volatility beginning in May 2015" and the the Shanghai Composite Index (SSE), China's main stock exchange, reached its peak on June 12th. To prevent further losses, on July 7th China Securities Regulatory Commission imposed severe limits on stock market selling. "[T]rading in over 90% of the 2,774 shares listed on Chinese exchanges" was suspended or halted. The China Securities Regulatory Commission By July 11th the SSE was down 25 percent, the "smaller, tech-dominated exchange" Shenzhen Stock Exchange (SZSE) was down 35 percent and investors had lost "about $3.5 trillion, equal to China’s total market capitalization in 2012." ChiNext, a NASDAQ-style board of the SSE, which had opened in 2009 had 464 firms listed by June 2015. During the July crash, Hong Kong’s Hang Seng index closed at almost 6% down, its biggest one-day drop since 2008. Some consider the The Black Monday flash to be a major aftershock of the 2015 Chinese stock market crash.

On August 21, 2015 the American investors suffered the "worst one-day drop since 2008" in a panicked selloff that left the Standard & Poor's 500 down 3.2% to 1,970.89. The Nasdaq composite index, "which has a lot of technology stocks, dropped 3.5% to 4,706.04."

The August 24 2015 Flash Crash also called the August 24-25 2015 stock market selloff was a brief bear market flash crash in global stock indices and "hundreds of billions were wiped off the world’s financial markets." The stock indices tumbled and the Dow Jones Industrial Average "dropped roughly 1,100 points in the first five minutes of trading" on Monday, August 24 and "ended the day down 588 points." According to an analyst at JPMorgan there was a sudden "large drop in equities in Asia" on Sunday evening which triggered the "drop in index futures in Europe" and the 7% drop in U.S. U.S. stock futures before the U.S. stock market opened on Monday morning. According to a December 6, 2015 article in the Wall Street Journal "the price of many ETFs appeared to come unhinged from their underlying value." As a result of the crash, ETFs were put under even greater scrutiny by regulators and investors. New regulations put in place following the 2010 Flash Crash — when prices of Exchange-traded funds (ETFs) and other stocks and options became volatile with trading markets spiking  and bids falling as low as a penny a share in what the Commodity Futures Trading Commission (CFTC) investigation described as one of the most turbulent periods in the history of financial markets. — proved to be inadequate to protect investors in the August 2015 flash crash. Analysts at Morningstar claim that,

By midday August 23, the SSE had lost 8.5% of it value, the worst since 1997 Asian financial crisis. As a result, billions of pounds were lost on international stock markets with some international commentators labeling the day Black Monday. The Shanghai Composite Index dropped "8,5% in the biggest selloff since 2007."

During the 45 minutes before the market normalized "more than 1,250 trading halts were triggered" with "each lasting for a minimum of five minutes." During the panicked selloff, at their lowest points, the S&P 500 Index fell by 5.3 per cent, iShares Core S&P 500 ETF fell 26 per cent, the Guggenheim S&P 500 Equal Weight ETF fell 43 per cent and the iShares S&P TSX Capped Financials Index Fund fell by as much as 27 per cent.

From the high to low for 2015 on August 24 Chevron's stock fell 48.5% to $69.58, Caterpillar fell 45.9% to $62.99, Du Pont fell 38.5% to $47.11, General Electric fell 37.3.3% to $19.37, Exxon Mobil fell 36.3% to $66.55, Intel fell 34.4% to $24.87, Verison fell 29.5% to $38.06, Pfizer fell 21.9% to $28.47 and Disney's stock traded as low as $90, dropping over 26% after having reached its all time high in August 4th.

According to Forbes The Dow Jones Industrial Average experienced its all-time intraday high of $18,351.36 on May 19, 2015 then fell to $15,370.33 during the August 24 flash crash representing a technical correction of 16.2%.

"[T]he Dow Jones was some 10% down over two trading days while even the local Top40 Index was off almost 8% over the Friday/Monday selloff period."

"[T]he rand traded at its worst level ever as it briefly went through R14/USD, breaching the R13.61/USD worst level from December 2001."

There were similar losses of over 7% on 25 August causing some commentators to call it Black Tuesday.

""ETFs are a 'digital-age technology' governed by "Depression-era legislation.""

- Morningstar December 6, 2015

By September 2015 the Shanghai Composite Index (SCI), had "lost more than 40 %" of its market capitalization.

By December 2015, China's Stock Regulatory Commission approved a plan to launch trading curb or stock index circuit breakers on the Shanghai Stock Exchange, Shenzhen Stock Exchange and China Financial Futures Exchange on January 1, 2016.