Stock markets resumed their downtrend as shares worldwide extended their losses on Monday. China, arguably the trigger for the latest rout in the markets, has seen its major benchmarks extend their losses, followed by other major Asian benchmarks. Recently released purchasing managers’ index (PMI) data for China has fallen below a value of 50 in August to its lowest score in over three years, indicating a state of retraction.
A separate report has pegged China’s manufacturing activity at an even lower value of 47.3 – the lowest seen since early 2009. The data touched on mounting concerns that the second-largest economy in the world has outgrown its rapid development phase, likely translating into a drop in demand for commodities and manufacturing. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.6%, erasing gains from earlier in the session. Overall, the index fell more than 10% in the month of August alone, marking its worst monthly performance in nearly 4 years.
The Shanghai Composite Index decline 1.2% and the CSI300 index declined 2.2 percent. Both indexes tumbled nearly 12% last month. Since June, Chinese shares have already lost 40% of their value despite unprecedented and often radical support measures put in place by the government.
Declines were also abound in U.S. trading as the Dow Jones closed the month of August with its worst monthly loss seen in the last five years. The index fell 114.98 points, or 0.7%, to trade at 16,528.03. The Dow has fallen 6.6% during August, its largest percent decline since mid 2010. The Standard & Poor’s 500 index fell 16.69 points, or 0.8%, to trade at 1972.18 as it reached a total decline of 6.3% over the last month. The Nasdaq Composite declined 51.82 points, or 1.1%, to trade at 4,776.51 for a total monthly decline of 6.9%. For both the Nasdaq and S&P, these monthly declines marked their worst performance since May of 2012. Trading was volatile yesterday as seen by the S&P volatility indicator, the CBOE. The index rose 9% to slightly above a level of 28.
Oil prices surged on Monday and lifted energy-related shares. However these were not enough to counter the overall market sentiment. Crude oil soared more than 8% overnight however these gains were quickly reversed in early Asian trading. As of this writing, crude oil has fallen 3% and is trading at $47.77 a barrel.
Eurozone unemployment data is scheduled to release today, followed by Canadian GDP and U.S. manufacturing data. ADP will release its U.S. employment change survey ahead of Friday’s official nonfarm payrolls data from the government. The European Central Bank will release its interest rate decision on Wednesday, likely maintaining its expansion policy for the time being.