While you were sleeping: China, oil sink stocks

Equities on both sides of the Atlantic fell as China struggled to contain the plunge of its stock market and as oil touched the lowest level in twelve years.

China halted trading in its stock market for the second time this week, as equities plummeted by more than 7 percent in the first 29 minutes. As a result, China suspended a so-called circuit breaker, implemented only earlier this week to avoid panic selling.

Billionaire George Soros is concerned.

"China has a major adjustment problem," Soros told an economic forum in Sri Lanka on Thursday. "I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008."

Oil prices rebounded from plunges earlier in the day, with Brent crude sinking more than 6 percent while US crude fell as much as 5.5 percent.

"There is a wall of worry under full construction, brought on by China, fall in oil prices and uncertainty regarding quarterly earnings," Terry Sandven, chief equity strategist at US Bank Wealth Management in Minneapolis, told Reuters.

Wall Street moved lower as it has every day this calendar year. In 12.43pm trading in New York, the Dow Jones Industrial Average retreated 1.4 percent, while the Nasdaq Composite Index dropped 1.8 percent. In 12.28pm trading, the Standard & Poor's 500 Index slid 1.3 percent.

"The Chinese economic outlook is getting bleaker," Daniel Weston, chief investment officer of Aimed Capital in Munich, told Bloomberg. "In August, the Chinese said it would be a 'one off' devaluation, but now the market knows it is much more than that."

Slides in shares of JPMorgan Chase and those of Boeing, recently each trading 2.6 percent weaker, led the Dow lower. Once again, shares of Wal-Mart Stores bucked the trend, last trading 1.9 percent stronger for the largest percentage gain in the Dow.

Some were optimistic about the outlook.

"There are very legitimate reasons for concerns. You could argue the market response has been very rational. At the same time, how much have things really changed? I would argue not much," Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Mass, told Reuters. "I could make a case that we could may see a number of positive surprises here in the US."

The latest US jobs data were positive. A Labor Department report showed initial claims for state unemployment benefits fell 10,000 to a seasonally adjusted 277,000 for the week ended January 2.

"The data are supportive of continued job gains," Jacob Oubina, senior economist at RBC Capital Markets in New York, told Reuters. "You don't go into a recession with jobless claims and layoffs at these low levels."

In Europe, the Stoxx 600 Index ended the day with a 2.2 percent decline from the previous close. France's CAC 40 Index lost 1.7 percent, while the UK's FTSE 100 Index slid 2 percent. Germany's DAX Index fell 2.3 percent to finish the session at 9,979.85, the first time it ended below 10,000 since October.

(BusinessDesk)