Shares on Wall Street slumped last night as fears of a China-led global slowdown gathered momentum.
The Dow Jones industrial average plunged by 531 points, more than 3 per cent, to close at 16,459.75, its worst day in four years and leaving the US index 10 per cent off its record high in May and firmly into correction territory.
The more broadly-based S&P 500 also fell by 3 per cent to 1,970.9, pushing it 5.7 per cent down for the past five days to record its worst weekly performance since 2011. More than ten billion shares changed hands in the US, above the recent daily average of seven billion.
Weak manufacturing figures in the States also added to concerns about global growth.
The sell-off came after an equally torrid day for Britain’s largest quoted companies as they slumped to within a whisker of their lowest level in two years. The FTSE 100 tumbled by 180.24 points, or 2.8 per cent, to 6,187.65 — its biggest weekly loss of the year.
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The decline extended its losing streak to nine successive sessions, the longest since 2011, in a move triggered by China’s surprise decision to devalue its currency last week.
David Madden, a market analyst at IG, said: “China has been on a mission to keep up the illusion of a gradual slowdown, but dealers aren’t buying it any more.”
Britain’s blue-chip companies have seen £92.8 billion wiped off their value this week and £234 billion since the index reached a record high in April.
Leading European shares endured their worst one-day decline in nearly four years. In Frankfurt the DAX was down by 3 per cent and in Paris the CAC-40 fell by 3.2 per cent. The Hang Seng in Hong Kong entered bear market territory, down by more than 20 per cent from its June peak and retreating by another 1.5 per cent.
The Nikkei 225 in Tokyo shed 3 per cent and the Shanghai Composite 4.2 per cent as investors fretted over Beijing’s support for the market. City traders said that shares were in freefall and that the market had entered uncharted waters with big unknowns ahead, particularly the timing of a rate rise in the United States.
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The shares rout in London was sparked by more weak data coming out of China that reinforced fears about a slowdown in the world’s second biggest economy. Chinese factory orders contracted at their fastest rate since the global financial crisis in 2009.
If the FTSE 100 were to fall again on Monday and Tuesday, it would equal the worst run since January 2003.
One equity trader said that the outlook for the rest of the year was downbeat. “You’ve got a period now where US interest rates are going to start rising. China has deteriorated, there is no question about it.
“We’ve always worried, is it a hard or a soft landing? It’s been soft so far, but it’s definitely deteriorated. China is a real concern now.”