The Chinese gloom spread globally, with markets in New York, London, Paris and Frankfurt all finishing their sessions sharply down.
US stocks gave up 2 per cent overnight, and the Australian market was 1 per cent lower at noon, Tuesday.
The health care and energy sectors led the retreat locally, after the latter gained by more than three per cent on Monday.
Energy giant Woodside Petroleum was down more than 1 per cent, Santos dropped 2.6 per cent and Origin Energy was off by 2.2 per cent.
There were no sectors in positive territory.
In equities news, electronics retailer Dick Smith has fallen into voluntary administration after failing to secure a funds injection from its banks.
The company blamed its financial woes on worse-than-expected sales and cash generation in December, continuing the weak trend from previous months.
At 10.25am (AEDT), the benchmark S&P/ASX200 index was down 1.11 per cent as investors reduce risk ahead of the resumption of trade in mainland China later Tuesday.
Chinese shares dropped 7 per cent on Monday before trade was suspended, and the gloom spread around the world with New York, London, Paris and Frankfurt all finishing the day sharply down.
“It does look like we will remain under pressure,” CMC Markets chief market strategist Michael McCarthy said.
“That weakening Aussie dollar is a positive, as is the continuing rise in iron ore, but I suspect in this global wave of weak sentiment those factors will be ignored and instead the key factor for today will be the performance of the markets in Shanghai and Shenzhen.”
Those markets open at 12.30pm (AEDT).
The big four banks led the Australian market lower, with ANZ declining 42 cents, or 1.53 per cent, to $27.11. Commonwealth Bank was down $1.20, or 1.42 per cent, to $83.26, NAB was down 37 cents, or 1.24 per cent, to $29.48, and Westpac was down 37 cents, or 1.12 per cent, to $32.63.
Mining giant Rio Tinto declined 65 cents, or 1.46 per cent, to $43.98, while BHP Billiton dropped eight cents, or 0.45 per cent, to $17.72.
The energy sector was another loser, with Origin down 13 cents, or 2.65 per cent, to $4.77.
Electronics retailer Harvey Norman looks to have benefited from the continued travails of competitor Dick Smith, which went into voluntary administration on Tuesday.
Against the backdrop of a falling market, Harvey Norman was up 0.5 cents, or 0.12 per cent, to $4.345, while JB Hi-Fi was down just seven cents, 0.35 per cent, to $20.17.
At 10.11am (AEDT) on Tuesday, the benchmark S&P/ASX200 index was down 55.3 points, or 1.05 per cent, at 5,215.2, while the broader All Ordinaries index was down 53.7 points, or 1.01 per cent, at 5,269.1.
On the ASX 24, the March share price index futures contract was down 75 points at 5,177 with 13,060 contracts traded.At 8.22am (AEDT) on Tuesday, the March share price index futures contract was down 34 points at 5,218.
Locally on Tuesday, the Dun and Bradstreet business expectations survey and the ANZ-Roy Morgan weekly consumer confidence survey will be released.
In Australia, the market on Monday was lower in the wake of a weak lead from US markets and profit-taking by investors.
The benchmark S&P/ASX200 index was down 25.4 points, or 0.48 per cent, at 5,270.5 points.
The broader All Ordinaries index was down 21.8 points, or 0.41 per cent, at 5,322.8 points.
NEW YORK – US stocks are two per cent lower, after weak Chinese economic data fanned fears of a global slowdown.
Surveys showed factory activity in the world’s second-largest economy shrank sharply in December, sparking a seven-per cent slide in Chinese shares that triggered a trading halt.
Adding to investors’ worries, China’s central bank fixed the yuan at a four and a half year low, further weakening it against the dollar.
US data sparked further concern as factory activity weakened unexpectedly in December, according to the Institute for Supply Management.
LONDON – European shares fell sharply on Monday, the first trading day of 2016, as weak Chinese data weighed on world stock markets.
“This year got off on the wrong foot because of China,” said ActivTrades chief market analyst Carlo Alberto De Casa.
All sectors were in negative territory with auto stocks , for whom China is a key overseas market, leading the way with a fall of 4.5 per cent.
But shares in Ferrari edged up 0.5 per cent in their Milan debut as the luxury sports car maker completed its spin-off from parent Fiat Chrysler. De Casa said the listing of such an important brand could be a good sign for Italy after many delistings.
HONG KONG – China’s Shanghai index has plunged nearly seven per cent after the release of the weak manufacturing data.
The official Xinhua News Agency said China halted trading on the Shanghai and Shenzhen stock markets after shares tumbled.
Poor Chinese manufacturing data and escalating tensions in the Middle East weighed on Asian markets. Oil prices rose.
Japan’s Nikkei 225 tumbled more than three per cent while Hong Kong’s Hang Seng retreated about 2.7 per cent.
ENERGY
Oil prices slid in volatile trading, following the stock market lower on fears of China’s slowing economy.
Earlier, crude jumped four per cent in early trade on Middle East tensions.
The Saudi-Iranian standoff raised fears over the security of oil supplies from the Middle East, estimated to hold about half of the world’s proven oil reserves.
Saudi Arabia, the world’s biggest oil exporter, cut diplomatic ties with Iran on Sunday in response to the storming of its embassy in Tehran, following Riyadh’s execution of a prominent Shi’ite cleric on Saturday.
Data showing an inventory build at the Cushing, Oklahoma delivery hub for US crude futures helped reverse crude prices.
PRECIOUS METALS
Gold prices have rallied two per cent to a four-week high, buoyed by rising tensions in the Middle East and a sharp drop in stocks following weak Chinese data.
Palladium, which as a largely industrial metal is more exposed than gold to economic weakness, dropped sharply, however, after Chinese manufacturing surveys undermined any hopes for a recovery in the sector.
The metal initially rallied along with oil after Saudi Arabia cut diplomatic ties with Iran.
“The main driver here is the tension between Saudi Arabia and Iran, and the escalating conflict between these two countries,” Commerzbank analyst Daniel Briesemann said.
“Weak Chinese data, coupled with plunging stock markets, is probably also playing a role, but geopolitical tensions are the main thing here.”
BASE METALS
Copper prices hit a two-week low after weak Chinese factory data weighed heavily on Shanghai equities and rekindled worries over economic growth in China and beyond.
Surveys showed factory activity in the world’s second-largest economy shrank again in December, sparking a seven per cent slide in Chinese shares that triggered a trading halt.
Adding to the worries, China’s central bank fixed the yuan at a four and a half year low.
“Manufacturing activity in China remains sluggish, services are relatively better, it’s like a two-speed economy,” said Xiao Fu, head of commodity market strategy at Bank of China International.
“Even with expected base metals production cuts, risks remain skewed to the downside, especially prior to the Chinese New Year.”
WASHINGTON – US construction spending fell for the first time in 17 months in November, reflecting weakness in spending on hotel and other private non-residential construction and government projects.
US manufacturers contracted in December at the fastest pace in more than six years as factories cut jobs and new orders shrank.
The US Justice Department has filed a civil lawsuit against Volkswagen AG for allegedly violating the Clean Air Act by installing illegal devices to impair emission control systems in nearly 600,000 vehicles.
Platinum producer Lonmin Plc has said in a regulatory filing that Kagiso Asset Management sold nearly 33 million shares in the company in December, fully divesting its stake.
ASX stocks to watch on Tuesday
AYS – AMAYSIM – up 45 cents, or 19.57 per cent, at $2.75: Mobile services provider Amaysim is acquiring Brisbane-based mobile virtual network operator Vaya to boost scale.
MLD – MACA – up two cents, or 2.74 per cent, at 75 cents
RRL – REGIS RESOURCES – up four cents, or 1.72 per cent, at $2.36: Mining services company MACA has won a contract renewal worth $115 million in revenue from gold miner Regis Resources, to provide mining services at the Moolart Well project in Western Australia for another five years.
WPL – WOODSIDE PETROLEUM – up 86 cents, or 2.99 per cent, at $29.58: Woodside Petroleum says a joint venture in Myanmar has struck gas in the offshore Rakhine basin.
AAP
