Stocks slump across Europe after China suspends trading
European shares fell on Monday on the first trading day of 2016 after weak Chinese data rekindled global growth worries, while oil prices jumped and bond yields dropped on rising tensions in the Middle East.
Chinese manufacturing surveys showed that any hopes for a recovery in the sector were premature, with factory activity contracting for a 10th straight month in December and at a faster pace than in the previous month.
Adding to the worries, China's central bank fixed the yuan at a four and a half year low. Mainland Chinese shares fell 7pc, prompting the stock exchange to halt trading.
European stocks followed Asia's lead. The pan-European FTSEurofirst 300 index fell 2.3pc, while the euro zone's blue-chip Euro STOXX 50 index declined by 2.6pc. Germany's DAX dropped 3.4pc.
"(Equity) investors are not going to like the start of this year, particularly when you have news that trading was halted in China due to a market sell-off," said Naeem Aslam, chief market analyst at AvaTrade.
Global oil benchmark Brent LCOc1, which fell 35pc last year due to fears of over-supply in a global slowdown, climbed more than a dollar to a high of $38.50 per barrel before easing back to $37.47.
The rise came as relations between leading crude producers Saudi Arabia and Iran deteriorated, raising concerns about potential supply disruptions.
Saudi Arabia, the world's biggest oil exporter, cut diplomatic ties with Iran on Sunday in response to the storming of its embassy in Tehran. Bilateral tensions escalated following Riyadh's execution of a prominent Shi'ite cleric on Saturday.
The Saudi riyal fell sharply against the dollar in the forward foreign exchange market. One-year dollar/Saudi riyal forwards jumped to 680 points, near a 16-year high.