US, European shares suffer worst one-day fall in nearly four years

Oil prices threaten to dip below $40 a barrel for first time since financial crisis

US and European shares suffered their worst one-day fall in nearly four years on Friday amid growing concerns over China’s economy hit world markets.

The collapse was triggered by fresh data from China suggesting its manufacturing sector shrank at its fastest pace in more than six years in August as domestic and export demand dwindled.

Emerging market assets also took another hammering and oil prices headed toward their longest losing streak in almost 30 years, threatening to dip below $40 a barrel for the first time since the financial crisis.

US crude was at a six-year low, on track for its eighth straight weekly decline down 2.52 per cent to $40.28 a barrel. Brent fell 2.57 per cent to $45.42 a barrel.


The pan-European FTSEurofirst 300 index closed down 3.40 per cent at 1,427.13 points.The index fell to its lowest level since January and had its worst one-day drop since a 3.44 percent slump in November 2011.

The euro zone’s blue-chip Euro STOXX 50 index fell 3.2 per cent. Germany’s Dax dropped 3 per cent, with the Dax nearly 20 per cent below record-highs reached in April.

Dublin's Iseq also fell by 3.1 per cent with notable losses for index heavyweights such as CRH, Ryanair and Smurfit Kappa.

Greece election

The Athens stock market also fell 2.5 per cent after Greek prime minister

Alexis Tsipras

resigned and a September 20th election was called.

MSCI’s emerging markets index was at its weakest in four years, while its all-country world stock index fell 1.64 per cent. The Dow Jones industrial average was down3.12 per cent or 530.94 points, to 16,459.75 by the late evening. The S&P 500 slid 64.84 points, or 3.19 per cent, to 1,974.52 and the Nasdaq Composite lost 64.45 points, or 3.52 per cent, to 4,706.04.

Thomas Lee, managing partner at Fundstrat Global Advisors in New York, said it was hard to say what was behind the sell-off.

“There’s no shortage of things people can cite, from the movement in currencies, to the weakness in commodities and fears about China,” Mr Lee said. “But at the end of the day if people are trying to take down risk, then it’s going to make sense for them to sell their exposure in equities as well.”

Antoine Deix, European equity and derivatives strategist at BNP Paribas said: "Regarding Greece, we are not that concerned at the moment, as Syriza is still by far the most popular party. It indicates that Syriza could get enough votes to get an absolute majority."

The Australian dollar, considered a liquid proxy for China demand, slid to $0.7285 at one point and was last trading at $0.7330, down 0.08 per cent. Additional reporting by Reuters, Bloomberg

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times