Wall Street kicked off 2016 with its worst first-day performance since 2001. Fears over China’s economy, raised by the large-scale selloff in Asian markets, have weighed down on markets worldwide. Chinese stocks were hit hard as weak financial data triggered a selloff as well as a circuit breaker, essentially halting all trading in an effort to maintain the market at a steady state. Tuesday’s early Asian trading session saw Chinese shares retreat, as investors remained timid despite Beijing’s efforts to restore market confidence. After falling more than 7% yesterday, the Shanghai Composite index moved in and out of negative territory to settle with 0.3% in losses. The CSI 300 index of the largest listed companies in Shanghai and Shenzhen rose 0.3% and MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.3%. The Japanese Nikkei index erased early gains to end the day with a 0.4% decline.
The Dow Jones fell as much as 450 points, eventually paring some of its losses to close the year’s first session with a 280 points decline, or 1.58%, trading at 17,148.94. The Standard & Poor’s 500 fell 31.26 points, or 1.53%, to trade at 2,012.66 and the Nasdaq Composite index fell 104.32 points, or 2.08%, to trade at 4,903.09. Monday marked the S&P’s and Nasdaq’s worst start since 2001. Despite the disappointing start for the year, a number of analysts pointed out that in years in which the Dow Jones fell more than 1% on the first day of the year, the rest of the year played out quite differently. On average major benchmarks have ended such years with an average of 9.5 in total gains, though critics were quick to point out that exceptions have occurred in ’01, ’02 and ’08 with 15% in losses.
In currencies, the euro remained weak against the dollar, trading at around $1.0831 after touching a one-month low earlier. Recent German data has shown weak inflation, putting more pressure on the European Central Bank to reconsider its easing measures, especially after they were criticized last month for an underwhelming stimulus program. The dollar index held its ground at 98.831 against a basket of six peer currencies. Crude oil edged up 0.4% to $37.9 a barrel, as tensions between Saudi Arabia and Iran escalated. Brent gained 0.3% to trade at $37.32 a barrel.
This week’s major economic data releases continue with today’s release German unemployment data, followed by Wednesday’s preliminary survey of U.S. employment, U.S. balance of trade, and minutes from the Federal Reserve’s Federal Open Market Committee (FOMC). European and Chinese balance of trade data will be released on Friday, followed by Canadian unemployment, U.S. nonfarm payrolls and China’s inflation data.