Tuesday 27 September 2016

Worst rout for European stocks since 2011 amid Chinese fears

Bloomberg and Colm Kelpie

Published 22/08/2015 | 02:30

Traders work on the floor of the New York Stock Exchange. Photo: Reuters
Traders work on the floor of the New York Stock Exchange. Photo: Reuters

Three days of panic sent the benchmark gauge for European equities into a correction. The sell-off that erased US stock gains for the year and pulled Chinese shares down dragged the Stoxx Europe 600 Index 6.7pc lower in three days, the worst plunge since September 2011.

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The gauge has lost 13pc from its April peak, joining Germany's DAX Index and the UK's FTSE 100 in entering a so-called correction.

By the close in Dublin, the ISEQ Overall Index ended the week down 3.11pc, or 198.21 points - the biggest one day fall since April - to 6,173.99.

The leaders on the Dublin market included shipping and transport group Irish Continental Group, which rose 1.3pc to €4.38, while Providence Resources rose 1.1pc to 22 cents. On the other side of the board, the laggards included insulation group KIngspan, which fell 2.6pc to €21.37, while agri-food group Glanbia closed down 2.2pc to €17.62.

The stock rout, which started when China devalued its currency, gathered strength after data showed the nation's manufacturing was the weakest since the global financial crisis.

The sell-off was broad-based - from commodities to currencies - while haven assets like gold and the yen climbed.

"China is a big elephant and when it moves it creates a lot of momentum," according to Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. "Market sentiment has changed to negative at absolutely the worst time of the year."

About $2.2 trillion was wiped from the value of global stocks in the first four days of the week. The S&P 500 Index, gave in, sinking the most since February.

Healthcare shares fell the most of the 19 industry groups on the Stoxx 600. Novartis' 3.6pc drop contributed the most to losses, after it announced a deal to buy the rights to an experimental drug.

Irish Independent

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