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Nikkei plunges 3% on weak Chinese manufacturing data

Kyodo, Bloomberg

Tokyo stocks tumbled on the first trading day of 2016 on Monday, with the Nikkei index ending down more than 3 percent, as a further decline in Chinese manufacturing conditions in December stoked ongoing concern about a slowdown in the world’s second-largest economy.

The 225-issue Nikkei Stock Average ended down 582.73 points, or 3.06 percent, from last Wednesday at 18,450.98, a roughly 10-week closing low. Tokyo markets were closed Thursday and Friday for the New Year holidays.

Crude oil surged after Saudi Arabia expelled Iran’s diplomats from its borders following an attack on its embassy in Tehran to protest the Saudis’ execution of a Shiite cleric.

“We were starting to see signs that the economic slowdown in China had run its course, but today’s data is a disappointment,” said Masayuki Otani, Tokyo-based chief market strategist at Securities Japan Inc. “The Saudi Arabia and Iran issue might be good for oil, but the increase in geopolitical risk means it’s an overall negative for the financial markets.”

The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 37.63 points, or 2.43 percent, lower at 1,509.67.

Foods, chemicals and transport equipment issues led decliners.

The Nikkei ended the first day of trading lower than the previous year’s close for the third year running.

Stocks opened lower, with investor sentiment dampened by losses on Wall Street on New Year’s Eve last Thursday. The Dow Jones Industrial Average fell more than 1 percent to close lower on an annual basis for the first time in seven years.

Losses then widened dramatically after the release midmorning of the private-sector Caixin purchasing managers’ index showed a further decline in business conditions for Chinese manufacturers.

In China, a rout in Shanghai and Shenzhen stocks following the data’s release triggered a trading halt midafternoon local time.

Trading volumes in Tokyo remained low with some investors still on holiday, leaving the market prone to a volatile response to the Chinese data, said Hiroaki Hiwada, strategist at Toyo Securities Co.

“If Wall Street shows a more muted response to the Chinese data later Monday, Tokyo stocks will likely gain back some ground Tuesday to line up with the U.S. reaction,” Hiwada said.

Also fueling selling Monday were concerns over geopolitical conditions in the Middle East after tensions between Saudi Arabia and Iran deepened over the weekend, said Chihiro Ota, general manager of investment research at SMBC Nikko Securities Inc.

  • Alfonso

    China has been in a slowdown situation since 4 years ago but the reality was masked with mumbo jumbo chinese IPO’s and stock buzz.

    There is no rocket science , the small investors just wanted to draw back their money before chinese New Year and paid off debts and have their money safe in their mattress

  • Alfonso

    China has been in a slowdown situation since 4 years ago but the reality was masked with mumbo jumbo chinese IPO’s and stock buzz.

    There is no rocket science , the small investors just wanted to draw back their money before chinese New Year and paid off debts and have their money safe in their mattress

  • lushnya

    Yes, China is slowing down in manufacturing because they reached the limit – their high-priced products can’t find consumer abroad.
    For example in Russia chinese goods are not even changed in price because of zero demand at all (Russian economy in deepest low ever) – and this is considering that yuan is now 2x times higher to local ruble – their products must be twice expensive objectively, but they are not.
    Also i think that China really likes what it’s neighbor Putin did – about lowering the local currency twice with lowering the standard of living. People in Russia become twice poor and now live worse. This is very unique situation when russian ruble is twice cheaper than chinese yuan – immediately all chinese good lost all it’s competitive features on market, it is Russia now can make export, not China.
    China lowering yuan 100% artificially, they agree to lower the life of millions people in the name of very cheap yuan which makes products cheap, this cheap products helps save manufacturing, jobs and etc. It is easier to rule poor people with some jobs than unemployment middle-class-which requiring political reforms.