NEW YORK (AP) — Stocks fell around the globe on the first trading day of 2016 as investors dumped shares on new fears of a Chinese economic slowdown and more turmoil in the Middle East. The Dow Jones industrial average sank 2 percent, following even sharper declines in Asia and Europe.
The trouble started in China on Monday after weak manufacturing data in the world’s second-largest economy sent the Shanghai Composite Index plunging 6.9 percent to its lowest level in nearly three months. The drop led stock markets in Shanghai and Shenzhen to halt trading for the remainder of Monday to avert steeper falls, the official Xinhua News Agency said. It was the first time China used the “circuit breaker” mechanism it announced late last year.
Chinese authorities have been trying for months to restore confidence in the country’s stocks after a plunge in June rattled global markets and prompted a panicked, multibillion-dollar government intervention. Beijing is gradually unwinding emergency controls that included a freeze on new stock offerings.
Traders were also unnerved by heightened tensions between Saudi Arabia, a huge oil supplier, and Iran. Saudi Arabia executed a prominent Shiite cleric, prompting protesters to set fire to the Saudi Embassy in Tehran.
In the U.S., the Dow Jones industrial average sank 384 points, or 2.2 percent, to 17,042 as of 12:44 p.m. Eastern time. The Standard & Poor’s 500 index lost 43 points, or 2.1 percent, to 2,000. The Nasdaq composite gave up 140 points, or 2.8 percent, to 4,867.
“The market is trying to anticipate the global growth story,” said Kevin Kelly, CIO of Recon Capital Partners. He added, “It’s going to be a turbulent year. This isn’t a blip.”
The drop in U.S. stocks sets the market up for its worse day since September and a gloomy start to the new year. Both the S&P 500 and the Dow indexes fell last year, the worst performance since the financial crisis in 2008.
On Monday, the selling in China spread quickly across markets in other Asian countries, then to Europe. The DAX index in Germany, whose export-led economy is sensitive to the fortunes of China, tumbled 4.3 percent. Britain’s FTSE 100 fell 2.4 percent while France’s CAC 40 dropped 2.5 percent.
Huang Cengdong, an analyst for Sinolink Securities in Shanghai, said selling accelerated as investors tried to lock in trades before trading was halted. He expects further turmoil ahead of corporate earnings reports.
“The market will not improve because there will be heavy selling in the near future,” said Huang.
Elsewhere in Asia, Japan’s Nikkei 225 tumbled 3.1 percent and Hong Kong’s Hang Seng retreated 2.7 percent. South Korea’s Kospi closed 2.2 percent lower. Stocks in Australia, Taiwan and Southeast Asia were also lower. Stocks in Australia, Taiwan and Southeast Asia were also lower.
The Caixin/Markit index of Chinese manufacturing, which is based on a survey of factory purchasing managers, fell in December for the 10th straight month. It was the latest sign of weakness in China to darken the outlook for Asian exporters. On Friday, an official manufacturing index also showed a persistent contraction activity despite Beijing’s stimulus measures.
Escalating tensions in the Middle East briefly sent the price of oil higher. Saudi Arabia said Sunday it is severing diplomatic relations with Iran, a development that could potentially threaten oil supply.
“Oil markets will be concerned that this could be an incremental step in a deteriorating political situation that might ultimately threaten world oil supply,” Ric Spooner, chief analyst at CMC Markets, said in a commentary.
Benchmark U.S. crude gave up an early gain and was down slightly in midday trading in New York. Oil was down 30 cents to $36.70 a barrel in New York Mercantile Exchange. It traded over $38 a barrel earlier in the day. Brent crude, which is used to price international oils, was little changed at $37.27 a barrel in London.
Oil and gas producers, which were battered last year, were among the few stocks in the S&P 500 to rise. Southwestern Energy climbed 21 cents, also 3 percent, to $7.31 and Consol Energy rose 6 cents, or 1 percent, to $7.96.
In other trading, some of the biggest decliners in the U.S. were companies that sharply outpaced the market last year. Netflix and Amazon, both of which more than doubled in price in 2015, were down sharply. Netflix sank $6.98, or 6 percent, to $107.43 and Amazon gave up $34.63, or 5 percent, to $640.14.
On the whole, technology was one of the weakest among the 10 sectors in the S&P 500 index. It was one of the better-performing industries in the market last year.
In currency trading, the dollar weakened to 119.35 yen from 120.23 yen. The euro fell to $1.0809 from $1.0858.
In government bond trading, U.S. bond prices rose. The yield on the 10-year Treasury note fell to 2.21 percent from 2.27 percent.
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Lee reported from Seoul, South Korea. AP researcher Fu Ting in Shanghai contributed to this story.