Happy New Year: Global Stocks Crash After China Is Halted Limit Down In Worst Start To Year In History

Tyler Durden's picture

It all started off relatively well: oil and US equity futures were buoyant on hopes Iran and Saudi Arabia would break out in a bloody conflict any minute boosting the net worth of shareholders of the military industrial complex, and then, out of nowhere, like a depressed China in a bull shop, the "mainland" crashed the party following a terrible manufacturing PMI report, which sent Chinese stocks sliding slowly at first, then very fast.


So fast, in fact that as we reported last night, on the very first day China's new circuit breaker mechanism became operational, it was promptly tested out and led to a marketwide trading halt at 1:34pm local after the Shanghai Composite crashed by the 7% limit. Earlier trading was halted for 15 minutes after the CSI Index - which comprises large capitalization companies listed in Shanghai and Shenzhen - dropped 5 percent.  This was the worst start of trading in Chinese stock market in history, and oddly enough, was something that not a single pundit predicted as part of their oh so very entertaining year-end forecasts.

And just in case crashing stock markets was not enough, the Chinese Yuan likewise crashed by over 0.6%, sliding north of 6.5325 at 4:50 local time after trading hours were extended and when the traditional PBOC intervention to calm the selloff did not appear in late day trading. The USDCNH was up to a whopping 6.6272 as China's devaluation accelerates with every passing day.

Slammed by the risk off sentiment, the main global carry trade currency, the Japanese yen, rose against all 31 of its major peers as investors sought the safest assets after China factory data highlighted weakness in the world's second-largest economy.

As a result of the Chinese collapse on day one, global equities dropped after the Chinese market fireworks, as well as geopolitical fears after Saudi Arabia severed ties with Iran, spurring a flight to haven assets. The MSCI Asia Pacific Index sank as much as 2.2 percent, the most since Sept.29. The Stoxx Europe 600 Index fell as much as 2.8 percent after gaining 7 percent in 2015. Last year the MSCI All Country World Index fell for the first year in four.

"It’s a nasty start for the year,” Peter Kinsella, a senior currency strategist at Commerzbank AG in London, tolf Bloomberg. “It might be the New Year, but old problems remain. Chinese growth concerns have not gone away.”

And then the Developing Nations were also routed: as Bloomberg points out, the slump in DMs harks back to financial turmoil in August that was fueled by China’s devaluation of the yuan. It shows the pace of growth in the world’s second-largest economy will remain key for markets in 2016 after a slowdown last year dragged emerging markets lower and sparked a slump in commodities prices.

So as we start the new year, Dow futures are down 300 points, the E-mini is down 34 points and just barely holding on to 2000, Asia is tumbling, Europe is crashing, and gold is up. At least  oil is so far green but just barely, up 1.5% at last check.

  • S&P 500 futures down 1.6% to 2007
  • Stoxx 600 down 2.4% to 357
  • FTSE 100 down 2.1% to 6109
  • DAX down 3.5% to 10362
  • German 10Yr yield down 5bps to 0.58%
  • Italian 10Yr yield down 5bps to 1.55%
  • Spanish 10Yr yield down 6bps to 1.72%
  • MSCI Asia Pacific down 2.1% to 129
  • Nikkei 225 down 3.1% to 18451
  • Hang Seng down 2.7% to 21327
  • Shanghai Composite down 6.9% to 3296
  • S&P/ASX 200 down 0.5% to 5270
  • US 10-yr yield down 5bps to 2.22%
  • Dollar Index down 0.55% to 98.14
  • WTI Crude futures up 1% to $37.40
  • Brent Futures up 1.6% to $37.88
  • Gold spot up 1.2% to $1,074
  • Silver spot up 1.3% to $13.99

In short, Happy New Year from the Federal Reserve, which is hiking because the "economy is strong"!

* * *

A more detailed look at regional markets, shows that the bloodbath started in Asia where equity markets begin the year negative following the losses on Wall St. in its last trading day of 2015, while further disappointing data from China added to the region's risk averse tone. Nikkei 225 (-3.1%) declined by over 3%, while Shanghai Comp (-6.85%) triggered the circuit breaker. Hang Seng (-2.8%) was also weighed on heavily in the wake of the poor China PMI data, where the official figure contracted for a 5th month. As a guide, a newly imposed Chinese circuit breaker means that if the CSI 300 falls 5% all Chinese equities will be halted for 15 minutes and then closed for the session if losses extend to 7%. Losses in the ASX 200 (-0.5%) have been capped by gains in the energy sector on increased tensions between Saudi and Iran. 10yr JGBs traded marginally higher as safe-havens were supported amid losses in riskier assets, although gains have been capped as participants are side-lined ahead of tomorrow's 10yr auction, while the BoJ were also relatively conservative in today's open market operation.

Top Asian News

  • China’s Two-Speed Economy Stays Intact as Manufacturing Weakens: Caixin China Dec. manufacturing PMI 48.2 vs est. 48.9
  • New World Said to Plan Buyout Bid for $7 Billion China Unit: Co. plans offer to take its $7b China unit private
  • Pimco Drawn to India as Asia’s Best Bonds Seen Rallying in 2016: Favorite destination for fixed-income investments, PineBridge says
  • Ant Financial Said to Seek At Least $1.5 Billion in New Funding: Seeking at least 10b yuan ($1.5b ) in a second round of fundraising ahead of a planned IPO, a person familiar said

In Europe, 2016 also has got off to a somewhat rocky start, with Euro Stoxx lower by around 2.8% as risk off sentiment is rife around financial markets. Much of the dampened sentiment this morning stems from China overnight, whereby newly imposed circuit breakers were triggered for Chinese equities in the wake of disappointing domestic manufacturing PMI data, while also of note the regional German CPIs have printed generally lower than previous. Given the focus on China, materials are the notable underperformer on a sector breakdown.

Top European News

  • U.K. Factories Disappoint With Slowest Growth in Three Months: U.K. manufacturing unexpectedly cooled in December
  • Ferrari Spinoff Puts Focus on Marchionne’s Fiat Revamp: Ferrari opened at EU43/shr in Milan following separation
  • Orange, Bouygues May Reach Takeover Deal in 1Q, JDD Reports: Cos. signed confidentiality agreement on Dec. 24 to start official negotiations
  • Continental May Lose Sales on VW Exhaust Scandal, CEO Tells BZ: Suppliers not involved in diesel exhaust probe, co. not under investigation anywhere by regulatory agencies

In terms of fixed income, Bunds have notably benefitted from the risk off sentiment, opening higher at the Eurex open and trading above the 158.50 level throughout the European morning. Bunds lead the way higher in terms of Europe, with the spread against most of their European counterparts wider this morning.

In FX, the JPY is the notable gainer in a flight to safety bid, while the USD has seen mixed flow to the benefit of the likes of EUR and GBP later in the session. The yen touched 118.70 per dollar, the strongest level since Oct. 15 and the Swiss franc was also among the biggest gainers among haven currencies. Australia’s dollar slid to 72.13 U.S. cents, down 1 percent from Dec. 31, while New Zealand’s currency was 0.9 percent weaker.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, slipped 0.2 percent. The gauge climbed 9 percent in 2015, a third straight gain.  Elsewhere NOK is also a notable underperformer today, reaching 1 year lows against the EUR and 23 year lows against the SEK, however given that the energy complex is relatively unchanged, it appears to be more technically driven.

Elsewhere, tier 1 data was released out of Europe in the form of manufacturing PMI's, in which Eurozone (M/M 53.2 vs. Exp. 53.1 Prey. 53.1) and German (M/M 53.2 vs. Exp. 53.0 Prey. 53.0) printed a slight beat and a miss on expectations respectively. While UK manufacturing PMI (M/M 51.9 vs. Exp. 52.8 Prey. 52.7, Rev. 52.5) missed expectations and caused a small downtick in GBP/USD.

Commodities have too been in flux, with spot gold (USD +11.90) outperforming amid the risk off sentiment, while Brent and WTI futures trade in mild positive territory, however shrugging off the latest escalation in tensions between Saudi Arabia and Iran. Commentators have suggested that the impact may be somewhat limited, with both countries eager not to cut output. U.S. crude added 0.9 percent after Saudi Arabia’s embassy in Tehran was attacked to protest the Saudis’ execution of a prominent Shiite cleric.

Oil last week capped the biggest two-year loss on record amid speculation a global glut will be prolonged as U.S. crude stockpiles expanded at a record rate and the Organization of Petroleum Exporting Countries abandoned output limits.

Base metals fell, with nickel and zinc sliding more than 2.5 percent on the Chinese manufacturing data. Copper fell 2.1 percent.


Global Top News

  • China Halts Stock Trading After 7% Tumble in Worst Start to Year: Weak manufacturing data, end to share-sale ban spark rout
  • Saudis Sever Diplomatic Ties With Iran in Row Over Execution: Move follows Saudi execution of prominent Shiite cleric, attack on Saudi embassy in Tehran
  • Shire Said in Advanced Talks to Acquire Drugmaker Baxalta: Cash-and-stock offer of ~$32b before debt could be announced as soon as this week
  • Fidelity Drops Credit-Card Partners AmEx, BofA: Visa, U.S. Bancorp to take over as Fidelity card’s network, issuer
  • Euro-Area Factories End 2015 With Strongest Growth in 20 Months: Manufacturing accelerated in December as rising new orders propelled output
  • Automakers’ December Surge Seen Wrapping Record U.S. Sales Year: Carmakers drew customers with year-end and holiday promotions
  • Fed’s Fischer Supports Higher Rates If Markets Overheating: Raise would be appropriate if asset prices “excessively high”
  • Macau Casinos Gain on Better-Than-Expected December Revenue: Gross gaming revenue fell 21.2% in Dec.; result was better than most market expectations of a 20% to 28% decline, according to DS Kim, an analyst at JPMorgan
  • Tesla Hits Low End of Goal, Shipping 17,400 Autos in Quarter: Delivered 50,580 Model S sedans and Model X sport utility vehicles in 2015
  • Force Stays With ‘Star Wars’ as Disney Film Remains No. 1: “The Force Awakens” generated $88.3m in sales in U.S. and Canadian theaters, for a domestic total so far of $740.3m

Bulletin Headline Summary from RanSquawk and Bloomberg

  • 2016 has got off to a somewhat rocky start, with Euro Stoxx lower by around 2.8% as risk off sentiment is rife around financial markets
  • FX markets have seen similar sentiment this morning, with JPY the notable gainer in a flight to safety bid
  • Looking ahead, the notable highlights out of the US today come in the form of manufacturing PMI, construction spending and ISM manufacturing
  • Treasuries rally led by 5Y to start the new year as global stocks plunge led by China after weaker than forecast manufacturing PMI; CSI Index halted after diving 7%.
  • China’s official PMI edged up to 49.7 in Dec. from three- year low of 49.6 in Nov., while Caixin China Manufacturing PMI index showed a drop to 48.2 from 48.6; both numbers less than forecast
  • Saudi Arabia severed ties with Iran in the biggest meltdown in relations between the two Middle Eastern power brokers in almost three decades, raising the specter of deepening conflicts across the volatile region. Saudi govt gave Iran’s ambassador 48 hours to leave after protesters set its embassy in Tehran on fire at the weekend following the execution of cleric Nimr al- Nimr, a critic of the kingdom’s treatment of its Shiite minority
  • For Europe, 2016 threatens to be a replay of 2015, with the migration crisis moving into a tense new phase, open internal borders under siege, Britain potentially heading for the EU exit and a hesitant Germany forced, once again, to act as the political and economic backstop
  • U.K. manufacturing unexpectedly cooled in Dec., with Markit’s factory index falling to three-month low of 51.9, less than expected, from a revised 52.5 in Nov.
  • Fed’s Stanley Fischer said it might be necessary for the central bank to hike rates if financial markets were overheating, though the first line of defense should be using regulatory tools to prevent bubbles from developing
  • ECB policy makers insist they’re standing by their mandate to keep the annual rate of price gains just under 2% over the medium term even as that becomes increasingly hard to achieve
  • $1.5t IG priced in 2015, $247b HY. BofAML Corporate Master Index OAS +1bp to +173, YTD range 180/129. High Yield Master II OAS holds at +695; YTD range 733/438
  • Sovereign bond yields lower. Asian and European stocks plunge, U.S. equity-index futures slide. Crude oil and gold higher, copper falls

US Economic Calendar

  • 9:45am: Markit Manufacturing PMI, Dec., est. 51.1 (prior 51.3)
  • 10:00am: ISM Manufacturing, Dec., est. 49.0 (prior 48.6); ISM Prices Paid, Dec., est. 36.0 (prior 35.5)
  • 10:00am: Construction Spending, Nov., est. 0.7% (prior 1.0%)

DB's Jim Reid concludes the rest of the overnight recap in his first 2016 edition

It’s straight to the overnight session in Asia where bourses have started the New Year very much on the back foot as softer than expected manufacturing data in China and escalating geopolitical concerns in the Middle East has helped fuel steep declines across the board. In China the Shanghai Comp is currently down -3.94% as we type after the non-official Caixin manufacturing PMI printed at 48.2 last month, a decline of 0.4pts and well below expectations of 48.9. It also marked the 10th straight sub-50 reading.

Meanwhile overnight headlines are also being dominated by the news that Saudi Arabia has severed its diplomatic ties with Iran. This comes after Saudi Arabia’s embassy was attacked in Tehran following the protests over the execution of a Shia cleric by the Saudi’s. Along with the China data that’s sent bourses down with the Nikkei (-2.80%), Hang Seng (-2.31%), Kospi (-1.62%) and ASX (-0.55%) all lower while S&P 500 futures are currently down over half a percent. Asia and Australia credit indices are both a couple of basis points wider although those geopolitical concerns have helped fuel a bid for Oil where both WTI and Brent are up over 2%.

Recapping briefly how markets closed out the final trading day of 2015 on Thursday last week. Equity markets closed on a sour note with losses for bourses on both sides of the pond. Indeed the S&P 500 finished -0.94% which, excluding dividends, meant the index closed in negative territory for the year (-0.73%). The Dow (-1.02%) and Nasdaq (-1.15%) closed lower also while it was a similar story in Europe as we saw the Stoxx 600 finish the session down - 0.51%. These falls came despite a better finish for the Oil complex where both WTI (+1.20%) and Brent (+2.25%) nudged back above the $37 level, although the same couldn’t be said for metals where Aluminum (-1.37%) and Copper (-0.63%) in particular failed to make any ground.

The last batch of economic data for the year was generally disappointing. Of particular note, the December Chicago PMI plunged 5.8pts to a below market 42.9 (vs. 50.0 expected) which was the lowest reading since July 2009. The ISM Milwaukee also printed sub-50 as expected at 48.5, although this was up over 3pts from the November reading while on the employment front there was a bigger than expected rise in the latest initial jobless claims print to 287k, up 20k from the previous print. The data had minimal impact on the rates market with US 10y yields closing out the year at 2.270% (down 2.5bps on the day) and just 10bps above where they closed 2014.

Meanwhile, Spain has been in focus over the weekend with the news from the Catalonia region that Acting President Artur Mas has failed in his attempt to win sufficient support from the anti-capitalist CUP party. The latest twist raises some uncertainty for the region now with Bloomberg noting that Mas’s Junts pel Si has until January 9th to establish a new government or instead run the risk of facing fresh elections which would be called in March. This of course is in addition to the overall political uncertainty in Spain itself after the inconclusive recent general election on December 20th.

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Looney's picture

Dennis Gartman must’ve gone long all the way, all two inches of it! ;-)


clooney_art's picture

China should start building more artificial islands,  there is a revolution coming there. The sheeple are going to revolt.

MarketAnarchist's picture

'Like a china in a bull shop.'  Tyler just peaked.

VinceFostersGhost's picture



I'm getting this feeling of Deja Vu.....

cheka's picture

nyc HOLIDAY bonuses in the tens of billions.  who cares about january?

w a l k - a w a y's picture

 'Like a china in a bull shop.'  Tyler just peaked.


FYI: 'Tyler' and 'peaked' do not belong in the same sentence

nmewn's picture

"Nothings wrong with China. I've talked to my people, don't sell China!" - Wank Mi Krammer

NoDebt's picture

A CNBC guest just said, very matter-of-factly, that China is growing at 2% mere minutes after the crew finished a discussion about how China's growth might not be 7% as reported but as low as (gasp!) 6%.   Becky Quick fell out of her chair.  "TWO percent?!?!?"  "Yeah, maybe as high as 2%.  Somewhere around there."


nmewn's picture

lol...when their paycheck depends on perpetual bullshit any form of reality is a shock to the system 

PTR's picture

I stopped reading as soon as I saw CNBC.


I just can't handle thier spin of disreality anymore.

So bad, it ain't even funny.

22winmag's picture

The little guy always get schlonged.


America will be schlonged (again) with or without the Donald.

NoDebt's picture

Well, SOMEBODY'S gotta pay for this mess.  Sure as shit isn't going to be the ones who caused it.


Arnold's picture

Didn't take long to get an answer to the 'how's Banana Man doing' OT yesterday.

Ok, youse guys, ya over did it a bit.

Arnold's picture

Any body short it successfully?


When a Chinese manager has successfully anticipated the market trend, where should we send the condolence flowers?

Id fight Gandhi's picture


The middle class of course cause they suck it up and don't complain loudly.


"Ah shucks gotta pay more for everything."


Poor will riot if cut off


Rich will cut and gut business and get welfare from govt bailouts.


eurogold's picture

Could this be the start of the much anticipated  " big reset" ? .............I hope so !

Arnold's picture


There are still checks in the checkbook.

Being Free's picture

What time is the Fed meeting?

VinceFostersGhost's picture



Janet Yellen has gone missing.


It's worse than that.....we can't find Yoda either.

RadioFlyer's picture
RadioFlyer (not verified) VinceFostersGhost Jan 4, 2016 8:22 AM

May the Farce be with you.  And you.

NoDebt's picture

I go fishing for a few days and just look at the mess you guys made of this place.  Markets crashed, Middle East ablaze (again) and somebody jumped the gun on the next revolution out in Oregon mere days before Obama is ready to create new gun control regulation out of thin air (again).

This is why we can't have nice things.

stant's picture

Sorry Nd, we all went to MDB s place for hookers and blow for the weekend.

VinceFostersGhost's picture



Screw that....I'm sick of going forward.


You go forward.......I'm staying right here.

NuckingFuts's picture

As much as I like ZH, it is a place where some folks think that jokes never die. Much like the "hilarious" names given our inept, corrupt politicians.... Ogolfer, Obomber...... That shit never gets tired. Just kidding, it is very tired. As is the Chinese language jokes. This is far from a PC rant, this is a its not funny anymore rant. Come up with something new.

Lucky Leprachaun's picture

That was funny the first few hundred times ......no longer.

PTR's picture

Alan's Snackbar instead?


Just sayin' for purposes of variety.

Balvan's picture

Every correction is a great buying opportunity.

Ghordius's picture

"It all started off relatively well: oil and US equity futures were buoyant on hopes Iran and Saudi Arabia would break out in a bloody conflict any minute boosting the net worth of shareholders of the military industrial complex..."

oh, my. such an elegant sentence, so horrible to contemplate it's content

kita27's picture

The U.S. dollar crashed up .8 of a cent, then collapsed a whole .1 of a cent.

Then the market collapsed before crashing in the biggest crash of the whole of 2016!!!!!!

The market dipped, and tomorrow or the next day it will rise. Fuck if you don't know that now you are sigh!

Save the crash talk for when it really happens, otherwise your just fucking crying Wolf over and over and we are starting to get tired of it.

Bindar Dundat's picture

kita27 -- You are so right. Tyler is starting to sound like fucking MSM.

_ConanTheLibertarian_'s picture

I have also commented on this several times now. So far I have been polite...

Lucky Leprachaun's picture

You're 100% right.  Just wish you were not.

Ghordius's picture

"For Europe, 2016 threatens to be a replay of 2015, with the migration crisis moving into a tense new phase, open internal borders under siege, Britain potentially heading for the EU exit and a hesitant Germany forced, once again, to act as the political and economic backstop"

Come on, Cameron, call that referendum. The times are ripe for BreXit

Lucky Leprachaun's picture

That's why he will not call it. Be assured of one thing: No matter what happens Britain will not leave. Massive propaganda, "judicial" reviews of what the OUT result actually means (it meant stay in), kick the can down the road indefinitely until an opportune moment for a new referendum to be held.  I could go on....

My Days Are Getting Fewer's picture

I thought Bre-X was a salted gold mine in Indonesia, traded in Canada and a symbol of global fraud.  But then, the EU is a fraud over regular people.

lester1's picture

If you still have money in this inflated stock market then you deserve to get wiped out !

Balvan's picture

Inflated stock market? It was 15k three years ago, and now it's 17k. And majority of people are cautios and bubble phobic. There are no signs of mania or euphoria.


If you that's a bubble now you've clearly never seen a bubble.


PirateOfBaltimore's picture

And it was sub 8k 3 yrs prior to that.




One of these growth rates is not like the other.

Arnold's picture

Your pension fund does, your 401k does, your 403b does,  Your broker does, your major companies borrowed money to buy their own stock at the top.  your large banking institution does, the Federal Reserve does.

Gonna be a tough exit.

Only one will be solvent, at a guaranteed 6% per annum.

Handful of Dust's picture

What gets me about China is their alleged cap controls limiting exodus of no more then $50k a year/person ... yet Mainlanders are all over USA, Canada, Australia with suitcases filled with millions in cash buying up million dollar houses?

1033eruth's picture

Obviously their trickle down works much better than our trickle down.  

_ConanTheLibertarian_'s picture

Makes me wonder, how did they get the cash through both customs? They possibly used Bitcoin instead which was converted to cash?

NoPension's picture

Simple. Someone got paid.

Just like everywhere.

The rules only apply to the little people. Not the rich, politicians or police.

ebworthen's picture

It will be a great Monday if the S&P goes below 2,000.

Long way to go to get to 666, but you have to start somewhere.

_ConanTheLibertarian_'s picture

Probably a big move up at the end of the day instead.

Debt-Is-Not-Money's picture

A journey of a thousand miles starts with but a single step!

- ancient Chinese proverb