FTSE CLOSE: Footsie tumbles in New Year global shares rout sparked by poor China factory data

17.20: The FTSE 100 shed 2 per cent of its value today, closing 148.89 points lower at 6093.43 after weak Chinese factory data set off a wave of selling across global markets.

The US Dow Jones and France's CAC 40 also fell 2 per cent, while Germany's DAX was 4 per cent in the red due to its greater exposure to China's manufacturing sector.

Political tensions between big oil producers Saudi Arabia and Iran pushed the price of Brent crude back above $37.02 a barrel, but caused further jitters among traders returning from the festive break.

Weak start: US stocks joined in the market rout on the first trading session of 2016 which was initiated by a sell-off in China following weak factory data which triggered share trading curbs

Weak start: US stocks joined in the market rout on the first trading session of 2016 which was initiated by a sell-off in China following weak factory data which triggered share trading curbs

'The root of today’s market hysteria was no doubt borne in China, where stocks fell 7 per cent, causing trading to halt under a new "circuit-breaker" mechanism,' said Joshua Mahony of IG.

'While the Caixin manufacturing PMI [purchasing managers' index] reading pointed towards continued weakness in the sector, today’s selloff is as likely to be reflecting the expected reaction to the impending end of a six-month lockup period for institutional investors share sales. 

'Unfortunately for Chinese regulators, they seem to be learning slowly that less is often better than more when it comes to controlling the stock market.'

He added: 'Oil prices have begun to show some signs of life, with heightened tensions in the Middle East threatening to cause yet more instability in a region already rife with war and conflict.

'The split of nations across religious lines is causing the severing of diplomatic ties, with Saudi Arabia and Iran at the centre of this current dispute.

'With Iran representing the latest entrant to the oil market after years of sanctions, the threat of disruptions to supply will no doubt cause downward revisions to the demand and supply picture for crude, which is in turn driving marginally higher prices.'

In London, miners who count China as a major customer were big fallers. Anglo American was down 21.6p to 277.9p, Glencore fell 5.2p to 85.3p, while Antofagasta slipped 23.6p to 445.7p.

Oil firms were also lower in the wake of Saudi Arabia cutting diplomatic ties with Iran. BP fell 6.5p to 347.6p, while Royal Dutch Shell was 5p lower at 1538p.

Pharmaceutical giant Shire was down more than 5 per cent or 245p to 4453p, amid speculation the Irish-based firm is close to completing a takeover of US rival Baxalta.

The pound was down a cent against the US dollar at just under $1.47, hovering around a nine-month low, driven down by a combination of weak commodities and fears that the UK may vote to leave the European Union.

Traders are also concerned that a hike in UK interest rates is a long way off, leaving the pound under pressure. Sterling was slightly higher against the euro at €1.36.

The only two risers in the FTSE 100 were Randgold Resources up 100p at 4243p and Fresnillo up 1.5p at 709.5p.

The biggest fallers in the FTSE 100 were Anglo American down 21.6p at 277.9p, Old Mutual down 11.5p at 167.4p, Glencore down 5.2p at 85.3p, and Shire down 245p at 4453p.

17.01: The FTSE 100 closed down 148.89 points at 6093.43. More to come. 

15.00: The Footsie nursed its wounds in late afternoon trading, remaining around 2 per cent lower on the first session of 2016 as US stocks joined in today's global markets rout initiated by a sell-off in China following weak factory data which triggered share trading curbs.

With an hour and a half of trading to go in London, the FTSE 100 index was down 119.9 points, or 1.9 per cent at 6,122.5, still on course for its second worst opening day of the year since its inception, beaten only by Jan 4 2000 when it fell 3.8 per cent.

European markets were even worse off, with Germany's Dax 30 index plunging 3.9 per cent, while France’s CAC 40 index fell 2.2 per cent.

And the malaise affected early trading on Wall Street, with the blue chip Dow Jones Industrial Average dropping 391.7 points, or 2.2 per cent, to 17,133.3, while the broader S&P 500 index shed 43.0 points at 2,000.9, and the tech-laden Nasdaq Composite lost 134.2 points, or 2.7 per cent to 4,873.2.

Jasper Lawler, market analyst at CMC Markets, said: ‘If the New Year is to bring new themes for investors to focus on, it hasn’t happened yet. Markets have been swept up in a renewed fear that China’s economic slowdown is picking up speed.

‘The surprisingly weak manufacturing data caused a 7 per cent decline in the CSI 300 prompting a halt in daily trading across Chinese stock markets.’

He added: ‘The fall in manufacturing activity amongst the small and medium enterprises in China tracked in the Caixin survey could offset the expansion in government deficit spending announced in December. China-exposed financial institutions.’

The latest US manufacturing data was also weak, with Markit’s final US manufacturing PMI at 51.2 per cent in December, its lowest level since October 2012, and lower than the flash estimate of 51.3 per cent.

Meanwhile, the more closely-watched ISM US manufacturing index fell to 48.2 per cent in December, down from 48.6 per cent in the previous month, defying expectations for a rise to 49.1 per cent.

And Markit’s UK manufacturing PMI disappointed today as well, which also weighed on equity markets in London and sent the pound lower against both the dollar – at $1.4735 – and the euro – at €1.3564 – as it reduced expectations for a Bank of England rate hike anytime soon.

Heavily-weighted miners, which are heavily reliant on demand from China, were hit hard in London following the disappointing Chinese manufacturing figures, with Anglo American dropping 5 per cent, or 14.9p to 284.6p.

Meanwhile, emerging markets-focused bank Standard Chartered was also under pressure on China growth concerns, dropping 5 per cent or 28.4p to 535.3p, and insurer and fund manager Old Mutual shed 9.8p to 169.1p.

Composite insurer Aviva slid 3.5 per cent, down 18.3p to 497.7p as analysts estimated the cost of the recent UK floods at over £2billion. Peel Hunt said that whilst manageable, the losses from the storms may have a noticeable impact on second half results for insurers such as Aviva and RSA Insurance - down 14.7p at 411.8p.

But precious metal miners Randgold Resources and Fresnillo bucked the trend, up 152p to 4,295p and 4p to 712p respectively, amid firmer gold prices on safe-haven buying following the Chinese data and heightened tensions between Saudi Arabia and Iran.

And selected energy shares rallied from earlier falls as the oil price rose on the Saudi/Iran tensions, with Brent crude reaching back up towards $39.00 a barrel. Royal Dutch Shell gained 7p at 1,550p, and BG Group – which Shell is in the process of taking over - added 5.7p at 990.7p. 

12.30: The Footsie was almost 2.5 per cent lower at lunchtime on the first day’s trading of 2016, weighed by big falls from commodity issues after stocks in China tumbled on poor factory data, with weak UK manufacturing data also having an impact, and US stocks expected to join in the malaise.

By mid session, the FTSE 100 index had slumped 154.9 points to 6,087.5, on course for its second worst opening day for a year since its inception, beaten only by Jan 4 2000 when it fell 3.8 per cent.

The mood was also gloomy in Europe, with Germany's Dax 30 index plunging 4.7 per cent, while France’s CAC 40 index shed 2.7 per cent.

NY drop: US futures were pointing to big losses on Wall Street today as well, with the Dow Jones Industrial Average expected to open down around 290 points, and the S&P 500 index down 34 points

NY drop: US futures were pointing to big losses on Wall Street today as well, with the Dow Jones Industrial Average expected to open down around 290 points, and the S&P 500 index down 34 points

Shares in China plummeted overnight after manufacturing data fell for the fifth consecutive month, pointing to the fact that 2016 is likely to continue the slowdown in the world’s second largest economy.

New measures to try and stop heavy falls on the Chinese stock markets were bought into force today and they were tested straight away, a fall of 5 per cent triggered an initial 15 minute suspension, a move that was supposed to stop sellers from selling further.

However after the market resumed it fell another 2 per cent hitting the second threshold of 7 per cent and suspending the sessions in China for the rest of the day.

James Hughes, Chief Market Analyst at GKFx said: ‘European markets have started in catastrophic style after shares in Asia dragged the entire market lower, with the US futures looking pointing to big losses on Wall Street as well.’

He added: ‘Just how bad the losses end up being all depends on how Wall Street reacts to today’s trading, and with futures pointing substantially lower we could be in for a tough afternoon. With very little economic data due before the open as well we may not see the picture change.

‘However a little later we do have US ISM manufacturing data due for release, which has the potential to move markets, however it will have to be a much better reading than the 49.00 expected to see gains strong enough to turn the sea of red into green.

Ahead of the New York open, Hughes said he expects to see the Dow Jones open around 290 points lower, with the S&P 500 index down 34 points.

The London market was also driven lower by a closely-watched UK manufacturing survey showing that Britain's output grew at its slowest pace for three months.

The Markit/CIPS UK manufacturing PMI fell to 51.9 in December, down from 52.5 in November and October's measure, with any figure over 50 indicating expansion.

On currency markets, the pound was slightly higher against the dollar at just under $1.48, but this still constituted a nine-month low driven down by a combination of weak commodities and fears that the UK may vote to leave the European Union.

Traders were also concerned that a hike in UK interest rates is a long way off, leaving the pound under pressure against the euro at €1.35.

Among equities, miners who count China as a major customer were big fallers. Anglo American was down 20.7p to 278.8p, Glencore fell 6p to 84.5p, while Antofagasta slipped 20.2p to 449.1p.

Energy firms were also lower in the wake of Saudi Arabia cutting diplomatic ties with Iran, two of the world's biggest oil producers, although Brent crude managed to rally slightly, back up near $38 a barrel albeit after sharp recent falls.

BP fell 9.7p to 344.4p, while Royal Dutch Shell was 29p lower at 1,514p.

Elsewhere, pharmaceutical giant Shire was down more than 3 per cent, or 158p to 4,540p, amid speculation the Irish-based firm is close to completing a takeover of US rival Baxalta.

This would complete a process that started in August, when Shire announced an all-stock deal then valued at $30.6billion (£20.7billion), which the Baxalta board rejected as undervaluing the firm. Analysts say Shire is likely to increase its offer to complete the deal.

Among the small caps, Vast Resources jumped 34 per cent, or 0.275p higher to 1.075p after raising up to £5million in an equity financing deal with US firm Crede Capital to support the expansion of its Romanian mining operations.

Two 2016 share tips from the Daily Mail's City & Finance team were also doing well, with healthcare services firm Totally surging over 30 per cent higher, and lithium producer Bacanora Minerals up 6 per cent.

09.50: The Footsie dived as the morning progressed on the first trading session of 2016 as commodity stocks slumped in the face of poor factory data from China, with the latest UK manufacturing data also coming in weaker than expected.

By mid morning, the FTSE 100 index had dropped 1.9 per cent, or 119.5 points to 6,122.8, extending the modest decline it made on New Year’s Eve.

European markets were even lower, with France’s CAC 40 index shed 2.3 per cent, and Germany’s Dax 30 index slumping 3.3 per cent.

Big falls: The FTSE 100 index had dropped almost 2 per cent by mid morning, starting 2016 in the same ways it finished 2015, which saw the UK blue chip index shed around 5 per cent over the year  

Big falls: The FTSE 100 index had dropped almost 2 per cent by mid morning, starting 2016 in the same ways it finished 2015, which saw the UK blue chip index shed around 5 per cent over the year  

On currency markets, the pound turned flat against the dollar at $1.4756 and eased back versus the euro to €1.3502 after a report showed British factory growth slipped in December as new orders came in at the slowest pace in five months.

The Markit/CIPS manufacturing purchasing managers' index dropped to a three-month low of 51.9, down from 52.5 in November, and missing forecasts for a rise to 52.7.

Rob Dobson, senior economist at Markit, said: ‘The UK manufacturing sector ended 2015 on a disappointing note, with its rate of growth slowing further from October's recent high back down towards the stagnation mark.

‘Although this would be an improvement on the second and third quarters, it does also suggest that manufacturing output over 2015 as a whole may be below the level achieved in 2014.’

Markit said its new business index fell to its lowest level since July, while a gauge of exports orders - which had improved in the previous three months - slipped back.

Mr Dobson added: ‘If this ongoing mix of subdued growth and weak price pressures remains prevalent elsewhere in the economy, the Bank of England will likely continue to push any potential rate increase later into 2016.’

And with interest rates looking set to remain on hold for the foreseeable future, the Bank of England today reported that British lending to consumers expanded at the fastest annual rate in almost a decade in November and banks approved more mortgages than forecast, showing a buoyant mood among households towards the end of 2015.

The Bank said net lending to consumers in November was up 8.3 per cent, or £1.476billion compared with a year earlier, the biggest such increase since February 2006.

Lenders also granted more home loans than expected, with 70,410 mortgages for house purchase approved, the highest number in three months.

Net mortgage lending, which lags approvals, rose £3.873billion in November, the BoE said, the biggest monthly increase since April 2008 and exceeding all forecasts.

Among equities, miners dominated the FTSE 100 fallers’ board on concerns for growth in top metals consumer China after the weak manufacturing data, with Anglo American dropping 8 per cent or 24.5p to 275.0p, while Antofagasta shed 5 per cent or 22.1p to 447.2p, and BHP Billiton lost 25.6p to 734.4p.

A private survey showed that China's factory activity contracted for the 10th straight month in December and at a sharper pace than in November, dampening hopes that the economy will enter 2016 on a steadier footing.

Mike van Dulken, head of research at Accendo Markets said: ‘The mining space remains under considerable pressure on account of sector adjustment to years of over-expansion, resulting in supply gluts with slowing global growth.

‘The overnight China data is likely to keep a cap on sector sentiment until we get signs of stabilisation in China, hints of more stimulus from Beijing or indeed solid signs of a euro zone rebound.’

Energy stocks were also lower, with BP off 2 per cent or 7.5p to 346.5p and Royal Dutch Shell down 13p at 1,530p after oil prices stagnated on concerns over Asia's slowing economies having jumped in early trading as relations between major crude producers Saudi Arabia and Iran deteriorated. Brent crude held around $37.50 a barrel.

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. The diplomatic row between the two major oil producers escalated following Riyadh's execution of a prominent Shi'ite Muslim cleric on Saturday.

But among mid-cap firms, Cairn Energy rose 3 per cent, or 4.4p to 162.1p after the oil explorer said it had got positive results from a well off the coast of Senegal. 

08:20: The Footsie was sharply down in early deals on the first session of 2016 after a steep sell-off in Chinese stocks, with share trading in Shanghai and Shenzen suspended after circuit breakers were triggered by the slide, while oil prices tumbled again on Middle East tensions.

In opening deals, the FTSE 100 index dropped 125.6 points to 6,116.4 , having finished 31.73 points lower on New Year's Eve, its last session on Thursday to notch up a 5 per cent overall fall for 2015.

On the Continent sentiment was little better, with France’s CAC 40 index declining 0.9 per cent, while Germany's Dax 30 index fell 1.1 per cent.

Tough times: Under China's new circuit-breaker mechanism, moves of 7 per cent from the previous session's close trigger a trading suspension for the day

Tough times: Under China's new circuit-breaker mechanism, moves of 7 per cent from the previous session's close trigger a trading suspension for the day

The falls in Europe followed steep losses overnight in China, where the benchmark Shanghai Composite index and the technology-heavy Shenzhen Composite saw trading halted early as under China's new circuit-breaker mechanism moves of 7 per cent from the previous session's close trigger a trading suspension for the day.

The Chinese Caixin manufacturing Purchasing Managers' Index fell to 48.2 in December, compared to the 48.6 reading a month earlier. 

The ongoing oil price rout also played its part with crude again volatile as relations between Saudi Arabia, the world's biggest oil exporter, and Iran, which hopes to return to the production market this year, deteriorated.

Saudi Arabia cut diplomatic ties with Iran yesterday following the storming of its embassy in Tehran. The diplomatic row escalated in the wake of Saudi Arabia's execution of a prominent Shi'ite cleric over the weekend.

Brent crude had climbed more than a dollar to a high of $38.50 per barrel before falling back to $38.18.

Naeem Aslam, analyst at Avatrade, said: 'Traders are going to be awfully cautious today, given what is taking place over in the Middle East. The fresh tensions between Iran and Saudi Arabia could become a major problem in the region.' 

He added: 'Crude oil opened sharply up after the holiday period, but it has given most of its gains. If the situation becomes more forceful between the two countries- Saudia Arabia and Iran, it could bring an enormous spike for the oil price. 

'The fact is that Saudi Arabia is already struggling with dropping oil price and fighting a war on its Syrian border and any further strains will immensely impact any foreign direct investment.

'The Saudis really need to implement policies which can bring more stability in the region.' 

On the data front, after the weak China factory data, Markit's UK manufacturing purchasing  manager's index is due this morning.

Forecasts are for a reading of 52.8, which would be slightly better than the previous reading of 52.7. 

A report published overnight by the CBI concluded that economic growth picked up in the final quarter of 2015 despite continuing problems for manufacturers.

A survey of more than 750 private companies revealed a strong end of year for business and professional services and an improving picture for retail and wholesale sectors.

But manufacturers, especially exporters, continue to face difficult times, said the business group.

The balance of firms reporting rising output in the past three months was 20 per cent, well up on the long run average of 5 per cent, with a similar pace of growth expected in the next quarter, it added.

Markit's final eurozone manfacturing PMI  will also be released this morning, with the US ISM manufacturing PMI due this afternoon. 

Stocks to watch in London include:

SHIRE - The drug company is near a takeover agreement with Baxalta, the producer of specialist treatments for cancer and haemophilia.

TESCO - The supermarket's unit in Turkey has decided to hang onto some of its stores instead of selling them to rival Turkish retailer Begendik after their performance improved strongly.

UK company news scheduled today includes: 

Nothing

Economic news scheduled today includes:

CBI published its growth indicator for December overnight

UK manufacturing PMI at 9.30am

BoE net lending, mortgage approvals at 9.30am

Final eurozone manaufacturing PMI at 9am

US ISM manufacturing PMI at 3pm 

US construction spending at 3pm 

 

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