Asian shares fall to four-year low on fears of China slump
Asian shares sank to their lowest in over four years on Monday as doubts mounted about Beijing's ability to manage the world's second-biggest economy.
The absence of Tokyo for a holiday only made liquidity even harder to come by, heightening volatility. Currency markets saw some wild swings with the South African rand collapsing to record lows at one point before bouncing.
MSCI's broadest index of Asia-Pacific shares outside Japan slid 1.8pc to its lowest since late 2011.
China's main indexes slumped more than 3pc at one point, Australia 1.25pc and the Philippines dropped 3.8pc.
Financial spreadbetters IG predicted opening losses of 0.5 percent for the FTSE 100, 1.5pc for the DAX and 1.2pc for France's CAC.
E-mini futures for the US S&P 500 fared better, turning flat after an early loss of 0.8pc.
Commodities were again on the ropes as Brent crude oil shed 79 cents to $32.76 a barrel, while US crude was 69 cents lighter at $32.47.
China was again the epicenter of unease as the People's Bank confounded analysts by guiding the yuan's midpoint rate sharply stronger, a move that might calm concerns about a competitive devaluation but only added to market confusion as to Beijing's ultimate intent on its currency policy.
The move was an apparent reversal of the midpoint's recent weakening trend which included the biggest one-day drop in the guidance rate in five months on January 7.
"Authorities are reluctant to let market forces rule, which along with their indecisiveness and lack of transparency is exacerbating uncertainty," said Tapas Strickland, an economist at National Australia Bank.
"Understandably, amidst this global markets are selling Chinese policymaker's ability to control their economy."
That only heightened tensions ahead of China trade data on Wednesday where declines are expected in exports and imports, underlining just how anemic world trade flows are right now.
Both the Dow and the S&P 500 had their worst five-day starts in history last week, and the corporate news flow is unlikely to get any cheerier with the coming results season expected to be a tough one.
S&P 500 earnings are forecast to have dropped 4.2pc in the fourth quarter, a second straight quarterly decline led by the hard-hit energy and materials sectors.
The pain in stocks and worries over China even outweighed the positive impact of December's upbeat U.S. payrolls report and burnished the appeal of higher-rated government bonds.