A 7 percent drop in Chinese shares halted trading in Shanghai and dragged down stock markets around the world. As Sonia Legg reports, weak factory data from China meant investors began 2016 with fresh worries over global growth.
Not the best start to 2016 - yet more evidence of the China slowdown sent stocks down 7 percent, forcing exchanges to suspend trading in line with new rules designed to prevent big sell-offs. Surveys showed China's factory activity contracted for the 10th straight month in December and at a sharper pace. Even larger state-owned firms, showed a fifth month of contraction. China's Central Bank added to the worries, fixing the yuan at a 4 and half year low. CMC Market's Jasper Lawler said the manufacturing data took investors by surprise. (SOUNDBITE) (English) CMC MARKETS, MARKET ANALYST, JASPER LAWLER, SAYING: "It was expected to show a modest increase in December, actually we saw quite a large decline. It's just renewed the same fears that dogged a lot of last year's trading, namely that the slow down in China's economy could be set to speed up." Emerging markets generally saw their biggest fall in four months. Deteriorating relations between Saudi Arabia and Iran didn't help - driving Saudi foreign exchange forwards close to a 16-year high. In the euro zone factory data from the top four economies was positive. But still the FTSE Eurofirst 300 headed down. Fidel Helmer is from Germany's Hauck and Aufhaeuser. (SOUNDBITE) (German) CAPITAL MARKETS EXPERT OF HAUCK & AUFHAEUSER PRIVATE BANK, FIDEL HELMER, SAYING: "The first five days of stock market trading normally determines the rest of the year. But our basic prerequisites have not changed: we have low interest rates and high liquidity so I don't have a negative view of 2016." The tensions prompted investors to seek the safety of bonds, particularly German ones. But no-one escapes when China suffers. And investors are also wondering how much further the U.S. Federal Reserve will raise rates this year.