Last Week's Global Stock Rout Returns As Futures Slide, China Tumbles To 4 Year Low

Global Market Rout Returns As Futures Slide, China Tumbles To 4 Year Low

Last week's global stock rout returned despite Friday's tentative bounce, as the selloff resumed in Asia with China tumbling 1.5%, closing at a fresh 4 year low, dragging European shares lower with S&P futures sliding 0.5% and Nasdaq futs down -0.8% on Monday, as a new diplomatic crisis between the US and Saudi Arabia added to a list of investor concerns and drove up oil prices. Safe havens bounced, led by Gold with Treasuries and the yen also rising.

“The breakdown in Brexit talks, the disappearance of dissident Saudi journalist Jamal Khashoggi, the demise of the CSU in Bavarian elections, the impasse over Italy’s budget and the worried tone coming from the IMF/World Bank meeting in Bali all combine to give financial markets an uncomfortable feel this morning,” according to SocGen FX strategist Kit Juckes.

A renewed threat by Trump to impose more sanctions on Beijing overpowered encouraging words from China’s securities regulator, accelerating the $3 trillion rout in China's stock market, while evidence of weakening domestic demand added to concern about the trade war with the U.S. The Shanghai Composite Index fell 1.5%, closing at session lows and the lowest level in the index since November 2014 following a weekend of warnings on global economic fragility from finance chiefs meeting at an annual IMF gathering.

"The fundamental issues that haunt investors -- lower global risk appetite and a slowing Chinese economy -- remain," said Ken Chen, Shanghai-based analyst with KGI Securities Co. "The market will only recover if those concerns are resolved, and it’s going to take more than just verbal promises."

The Hang Seng Index fell 1.4% after three weeks of losses, while the Hang Seng China Enterprises Index dropped 1.5%. Tencent Holdings Ltd. slumped 1.9%. As we reported last week, purchases of passenger vehicles by Chinese dealerships plunged for a third straight month in September, dropping the most on record.

Asian weakness spread to Europe, where industrial goods makers and technology firms were the biggest losers in the Stoxx Europe 600 index.