Stocks slide on renewed China fears

Global stocks turned lower on Tuesday (September 1st) amid renewed fears about the health of China’s economy as data showed factory activity contracted at its fastest pace in three years.

Japan’s Nikkei closed down almost four per cent as bourses in Asia were hit by the latest manufacturing purchasing managers’ index (PMI) from China, which fell to 49.7 in August from 50 in July. It was the first contraction since February.

Markets in Europe opened lower, with the pan-European FTSEurofirst 300 shedding 2.2 per cent in morning trading.

The DAX in Frankfurt slipped 2.5 per cent, while London’s FTSE 100 dipped by more two per cent as mining shares were hit by the market jitters.

Stock futures trading in the US pointed to a lower open on Wall Street, after the Dow Jones ended August on Monday with its steepest monthly loss in five years.

It follows last week’s wild swings in equity markets as investors sounded alarm bells about the state of China’s economy. August was the worst month for the FTSE 100 and the S&P 500 since May 2012.

Nariman Behravesh, chief economist for IHS told AP that while a “measure of calm had returned” to markets, “underlying negative fundamentals” were still evident.

"As a result, the downside risks for most commodity prices, exchange rates and stock markets are likely to persist for some time, while growth in many parts of the world, especially in emerging markets, is likely to deteriorate further,” he added.

Meanwhile, oil was also lower having surged on Monday by eight per cent. US light crude dipped by more than two per cent to hold just above $48 a barrel, but remained close to its strongest in over a month. Brent crude fell by a similar margin to just below $53 a barrel.

The US dollar fell against its major peers, with the dollar index dropping by 0.4 per cent as fears about China sparked risk aversion.

EUR/USD rose 0.5 per cent to 1.1265, but the greenback rose against the pound. GBP/USD hit a three-month low as the UK’s manufacturing data dragged on sterling.