China slowdown spooks global markets, while UK and US manufacturing disappoint - as it happened

Share trading in China halted as survey renews fears of economic slowdown.

Eurozone manufacturing improves, but UK and US below expectations.

Around 38bn wiped off FTSE 100.

5.38pm GMT

So it's been a not-so-happy new year start on stock markets.

Any investors hoping 2016 would bring some fresh market forces will have been spooked by a very familiar pattern today, as weak manufacturing data from China again provided much of the (downward) momentum.

5.01pm GMT

Time for a round-up of European stock markets at the close and on many exchanges it's clearly been the worst start to the year for many years.

The FTSE 100 has lost almost 2.4% on the first day of trading in 2016, that's a drop of 149 points to 6093. The bluechip index is now at its lowest since 22 December and today marked the biggest one-day drop since a 2.5% fall on 28 September 2015. It is also the second worst opening day on record, says RBS.

FTSE 100 posts 2nd worst opening day on record, down 2.6%. (h/t/ @asentance for eagle eyes on chart) pic.twitter.com/ctqs8uXj3j

If the Dow closes where it is now, down 2.2%, it will be its worst opening day performance since 1932, when it fell 8.1% on Jan 4 that year.

Dow's worst starts to a year over the past century: -8.1% in 1932 -2.3% in 1922 -1.8% in 1983 -1.7% in 1930, 1980 and 2008 Currently -2.5%

4.33pm GMT

Just when you thought it might be safe to bet on a rising oil price, Brent crude has turned negative.

It had rallied to a session high of $38.99 a barrel earlier on the back of predictions supply could be hit by tensions between Iran and Saudia Arabia. But the price fell back on worries about slower demand after news of a further factory slowdown in China and releases from the US showing its construction and manufacturing sectors had lost steam.

4.23pm GMT

Meanwhile, former Bank of England policymaker David Blanchflower has been scouring the skies for omens....

Just saw my first adult bald eagle of 2016 not sure what it means as stocks plunge but I couldn't see any vultures circling though

4.18pm GMT

Sweden's central bank has come a step closer to intervening in currency markets to weaken the crown, which it worries is keeping inflation from rising back to more normal levels.

Against the backdrop of negative interest rates, a quantitative easing programme and a Swedish inflation rate in negative territory at -0.1%, the Riksbank's governor Stefan Ingves said last week the central bank was ready to start currency interventions to stop the crown from strengthening.

"Since the last monetary policy meeting in mid-December, the Swedish krona has appreciated against most other currencies. If this development were to continue, it could jeopardise the ongoing upturn in inflation."

3.51pm GMT

With global downturn fears prompting such a rocky start to the new year for global markets, what perfect timing for the IMF's new economist to share his predictions for 2016.

China will remain high on the list. Its economy is slowing as it transitions from investment and manufacturing to consumption and services. But the global spillovers from China's reduced rate of growth, through its diminished imports and lower demand for commodities, have been much larger than we would have anticipated. Serious challenges to restructuring remain in terms of state-owned enterprise balance sheet weaknesses, the financial markets, and the general flexibility and rationality of resource allocation. Growth below the authorities' official targets could again spook global financial markets-but then again, time-honored methods of enforcing growth targets could simply extend economic imbalances, spelling possible trouble down the road.

There was good news and bad news. The U.S. economy continued its solid growth and job creation, while Europe generally picked up speed and Japan remained a question mark. But with some exceptions (such as India), emerging and developing countries continued to slow in the face of falling commodity prices and tighter financial conditions, and synchronized and sustainable global growth remained elusive.

3.28pm GMT

Separate date from the US construction sector also strikes a downbeat tone.

The Commerce Department said construction spending fell for the first time in nearly 1-1/2 years in November. Spending fell 0.4% after a downwardly revised 0.3% rise in October.

ISM shows US manufacturing declines at fastest pace in 6 years. Remind me why the #Fed is raising rates? #markets #stocks #bonds #fx #forex

3.12pm GMT

Hot on the heels of that weaker Markit PMI report on US manufacturers comes the separate Institute for Supply Management report and it makes even gloomier reading, suggesting the sector shrank again in December.

The main activity index fell to 48.2 in December from 48.6 in November, confounding forecasts for a pick-up to 49.0 in a Reuters poll of economists.

Manufacturing Recession Deepens: ISM Manufacturing 48.2, Exp. 49.0, Last 48.6

3.02pm GMT

More details on that weaker Markit U.S. Manufacturing Purchasing Managers' Index:

The authors note the latest reading (51.2 in December) was much weaker than the survey average (54.2) and pointed to "only a marginal upturn in operating conditions".

Markit #US Manufacturing #PMI falls to 51.2 in December, lowest level since Oct'12 https://t.co/kSnmmAbUqU pic.twitter.com/KtkpIgnjlg

"The manufacturing sector saw a disappointing end to 2015, and its plight looks set to continue into the New Year as headwinds show no sign of abating any time soon.

"Order book growth has stalled as producers report some of the toughest trading conditions since the end of the global financial crisis.

2.55pm GMT

The US manufacturing sector grew at a slower pace in December, expanding at the weakest pace for more than three years, according to the latest PMI report from the world's biggest economy.

The survey by data company Markit also pointed to a slowdown in orders, with the weakest reading since during the financial crisis in September 2009.

2.36pm GMT

Ahead of the latest US manufacturing data, American markets have joined in the global rout prompted by weak Chinese figures earlier.

The Dow Jones Industrial Average has slumped 350 points or 2% in early trading, while Nasdaq is 2.2% lower and the S&P 500 is off 1.2%.

2.35pm GMT

Worst first-day performance ever for Shanghai Comp, India's Nifty. (major indices except Topix more than a decade) pic.twitter.com/IRiBOFTdil

2.08pm GMT

With the FTSE 100 down 2.3%, here are the major movers. With commodity prices falling on renewed fears of a Chinese slowdown, it is no surprise that mining shares are among the biggest fallers. Standard Chartered is also down due to its exposure to emerging markets, and commodity company lending.

An exception to the mining slide is Randgold Resources, lifted by a rise in the gold price as investors seek a haven for their cash:

1.51pm GMT

Danny Blanchflower, former member of the Bank of England's monetary policy committee:

China stocks slump; Brazil headed into deep recession; German inflation drops; UK manuf PMI slows; Middle East turmoil- UK rate rise anyone?

1.14pm GMT

German inflation figures are one positive in a flurry of negative news, according to Carsten Brzeski at ING Bank:

With these December data, the year 2015 marks the lowest average annual inflation rate in Germany since the start of the monetary union.

Looking at the available components at the regional levels shows that the drop in headline inflation was not only driven by lower energy prices but also some tentative second-round effects on consumer goods and probably first discounts in the Christmas sale season.

1.05pm GMT

German inflation figures have come in slightly weaker than expected in December:

German CPI EU Harmonized (MoM) Dec P: 0.00% (est 0.20%; prev 0.10%) -CPI EU Harmonized (YoY) Dec P: 0.20% (est 0.40%; prev 0.30%)

12.23pm GMT

Apart from the weak data, there is another reason for the slump in Chinese shares, according to Mark Dampier, head of investment research at Hargreaves Lansdown:

Contrary to reports, the fall in the Chinese stock market has little to do with the December PMI data coming in at 49.7 against a consensus of 49.8. It has far more to do with worries that major shareholders will reduce their positions after the ban of share sales and short selling which came in at the end of trading on Friday.

12.21pm GMT

The slide in global markets is getting worse.

Germany's Dax, now down 4.3% is heading for its biggest daily fall since August last year following the global market rout in the wake of renewed worries about the Chinese economy. Germany of course is a major exporter and likely to be hard hit by any slowdown.

The #China factor: Dax plunges by 4.4%, biggest fall since Black Monday in Aug on fears over hard landing in China. pic.twitter.com/GLVlbTetZ3

11.52am GMT

It looks like the global share sell-off which has followed the weak Chinese data will extend to US markets:

Dow futures fall more than 310 points, Nasdaq futures lower by more than 2% https://t.co/sommmOynTY pic.twitter.com/2VxHodjibz

11.48am GMT

Daniel Vernazza, lead UK economist at UniCredit Research, said:

With economic growth slowing and consumer credit growth rising fast, the risk to our forecast for the first Bank of England hike to come in May this year is that they delay further and try to use macroprudential policy as the first line of defence against risks to financial stability.

The weakness in UK manufacturing activity is explained by a number of headwinds facing UK manufacturers. First, sterling's past appreciation is still weighing on the competitiveness of UK manufacturers. Second, external demand remains subdued, particularly in emerging markets. Earlier today, Caixin's China manufacturing PMI surprisingly fell back to 48.2 in December from 48.6 in the prior month; and the new export orders sub-component fell sharply from 51.6 to 47.8, suggesting weak external demand.

11.17am GMT

On the UK manufacturing data, economist Malcolm Barr at JP Morgan said:

The December manufacturing PMI release was a modest disappointment, with the headline index nudging down to 51.9 (J.P. Morgan 52.5) from a revised 52.5 in November (previously reported as 52.7). Having stepped down in late 2014 the PMI has been in a range between 51.5 (the survey's long run average) and 54 for nearly all of 2015.

The data increasingly make the move up in activity in to 55.2 in October look like it was a blip.

10.53am GMT

The pound has hit a nine month low against the dollar, as weakness in the economy cast doubt over an imminent UK rate rise and worries grew over the impact of any departure from the European Union. Sterling was down to $1.4684, its lowest since April, and is currently at $1.4795.

10.31am GMT

And here's a nice graphic showing how China's CS! 300 suffered major falls last year. And the new year is already on the way to a similar performance.

Number of Days China's CSI 300 Dropped by More than 3%: 2015: 22, 2014: 2, 2013: 7, 2012: 0, 2011: 7. pic.twitter.com/gSA1PoWcAD

10.23am GMT

The grim start to the new year means some 34bn has been wiped off the value of Britain's top one hundred companies with the FTSE 100 down 133 points.

Alastair McCaig, market analyst at IG, said:

Anyone hitting the trading floor expecting a calm and quiet start to 2016 was given a rude surprise as Asian chaos affected European markets. Worries over China's ability to keep up its pace of economic growth have been hit with an early warning sign as the Caixin PMI data came in weaker than expected, and stretched the contraction in China to ten months. This swift return to the 2015 template of worrying about China looks to have been the trigger for the selloff in Chinese equities. It is the first time Chinese regulators have activated the suspension in trading as a circuit breaker safety measure.

Starting the year off by suspending trading an hour and a half early on the back of a 7% fall has set an ugly precedent for the year ahead. Tensions in the Middle East have escalated again as the relationship between Saudi Arabia and Iran is being stretched to breaking point. Considering the prominence both nations take as far as global oil supply is concerned, the subsequent spike in oil prices is, if anything, a little on the mild side.

10.04am GMT

An interest rate rise is still on the cards this year, even though the manufacturing sector has come in weaker than expected, according to ING Bank. However any increase in borrowing costs may now come later than forecasters currently believe, said ING's James Smith:

The UK manufacturing PMI fell unexpectedly to 51.9 in December, from 52.7 previously (consensus 52.8), consistent with levels seen through most of 2015 before the surprise uplift in October. This marks a disappointing end for what was a difficult year for the manufacturing sector given external growth concerns and sterling strength. Looking at the details, Markit said that input prices continued to fall sharply in December, which they attribute to lower commodity prices (principally oil). Furthermore, export orders continued to grow, albeit at a slower pace.

All in all, this suggests that the manufacturing sector contributed very little to fourth quarter GDP growth (released at the end of this month), although it is worth noting that manufacturing only forms around 10% of the UK economy (versus 30% in the late 1970s). The service sector, which makes up over three quarters, is performing better and we should get a further indication of this on Wednesday when the services PMI is released.

9.54am GMT

Despite the disappointing UK manufacturing figures, Howard Archer of IHS Global Insight said there could be a pickup in GDP growth in the fourth quarter:

Despite December's dip, the purchasing managers' survey does show overall improvement in the fourth quarter of 2015; and it does look possible that the manufacturing sector managed to eke out a modicum of growth in the fourth quarter after contracting in both the third (by 0.4% quarter-on-quarter) and second quarters (by 0.6%). In fact the manufacturing PMI averaged 53.3 in the fourth quarter, which was markedly above the third quarter average of 51.8 and clearly above the 50.0 level indicates flat activity. Meanwhile, although latest hard data show that manufacturing output dipped 0.4% month-on-month in October this followed increases in both September (0.9%) and August (0.3%) so it was actually up 0.4% on a three-month/three-month basis.

If the manufacturing sector did manage to eke out some growth in the fourth quarter, it would boost the chances that the economy managed to achieve some pick-up in GDP growth after it dipped to 0.4% quarter-on-quarter in the third quarter. We have pencilled in GDP growth of 0.6% quarter-on quarter in the fourth quarter of 2015.

9.48am GMT

Meanwhile, more signs of a buoyant UK housing market and confident consumers, with higher than expected lending figures. Reuters reports:

British lending to consumers expanded at the fastest annual rate in almost a decade in November and banks approved more mortgages than forecast, showing a buoyant mood among households towards the end of 2015.

The Bank of England said net lending to consumers in November was up 8.3 percent compared with a year earlier, the biggest such increase since February 2006 and a growth rate that may raise concern at the Bank about lending standards.

9.41am GMT

Here are the key charts for the disappointing UK manufacturing data:

9.36am GMT

The manufacturing data is more bad news for chancellor George Osborne, and his chances of hitting his Autumn Statement targets. Rob Dobson, senior economist at Markit said:

The UK manufacturing sector ended 2015 on a disappointing note, with its rate of growth slowing further from October's recent high back down towards the stagnation mark. This suggests that industry will make, at best, only a marginal positive contribution to broader economic growth in the final quarter of the year.

Although this would be an improvement on the second and third quarters, it does also suggest that manufacturing output over 2015 as a whole may be below the level achieved in 2014. With the latest revisions to official data also suggesting that GDP growth earlier in the year was softer than previously thought, the emphasis has really shifted to other sectors of the economy if the rate of expansion for the year as a whole is to come in close to the OBR forecast as outlined in the Autumn Statement.

9.32am GMT

And after the positive eurozone figures, the UK purchasing managers' index has come in below expectations, recording its slowest growth in three months.

The index fell from 52.5 in November to 51.9 last month, below expectations of a figure of 52.7. New orders came in at their slowest pace for five years, according to the Markit survey.

9.23am GMT

Here's our story on the rising oil price:

Related: Oil prices gain on Saudi-Iran diplomatic tensions

9.22am GMT

Economist Howard Archer at IHS Global Insight said:

The improved Eurozone manufacturing survey for December supports hopes that Eurozone growth picked up to at least 0.4% quarter-on-quarter in the in the fourth quarter of 2014 after dipping to 0.3% quarter-on-quarter in the third quarter from 0.4% in the second and a peak of 0.5% in the first quarter.

Eurozone manufacturers are currently getting appreciable help from very low oil and commodity prices which is boosting their ability to price competitively to win business. In addition, a weak euro is boosting Eurozone manufacturers' competitiveness in international markets - so they will be hoping that the euro does not rise any further after firming to be currently trade close to $1.09 from a seven-month low of $1.055 earlier in December. Meanwhile, the fundamentals look reasonably solid for consumer spending in the eurozone which should be supportive to demand for durable manufactured goods. Consumers' purchasing power is getting a serious boost from very low inflation/deflation across all countries while labour markets have generally improved. Indeed, it is notable that the European Commission reported that consumers' perception of whether it is a good time to make major purchases now and during the next 12 months in November were only just below September's respective strongest levels since September 2001 and February 2008.

9.17am GMT

Commenting on the eurozone PMI figure, Markit said:

The eurozone manufacturing sector continued to make solid progress at the end of 2015, as rates of growth in production, new orders and new export business all improved. Although input costs and output charges fell again, trends in both provided further evidence of deflationary pressures easing.

With the Greek PMI edging back above 50.0, December saw PMI readings in all of the nations covered at levels signalling expansion for the first time since April 2014. Italy remained the fastest- growing, with its rate of expansion improving to a 57- month record.

9.08am GMT

So the overall picture for eurozone manufacturing has shown an improvement.

The purchasing managers' index for the eurozone came in at 53.2 in December, according to Markit. This compares to the 53.1 initial estimate, and the 52.8 recorded in November.

9.04am GMT

And Greek manufacturing has also shown an improvement:

Greek Manufacturing PMI (Dec) 50.2, previous 48.1

Above 50 for the first time since August 2014

Greek manufacturers reported a slight improvement in operating conditions in December, ending a sequence of deterioration which began in September 2014. The upturn in manufacturing was driven by higher production, which returned to expansionary territory for the first time in 12 months. Encouragingly, a slight increase in staff numbers was also reported.

9.03am GMT

The German manufacturing sector has recorded its best performance for four months, according to the PMI survey.

The Markit index rose from 52.9 in November to 53.2 last month, and economist Oliver Kolodseike said:

Reflective of the trend observed throughout 2015, the Germany Manufacturing PMI posted above the no- change mark of 50.0 in December, thereby signalling sustained growth in the sector. New order intakes continued to grow at a healthy rate, with demand for consumer goods particularly strong and exports showing the largest monthly rise since February 2014.

However, the strong rise in new business resulted in capacity problems at some plants, with business outstanding rising at the sharpest rate for nearly two years. It is therefore likely that employment and output will continue to increase in coming months.

8.59am GMT

Meanwhile in France the purchasing managers' index hit a 21 month high, according to Markit.

The index climbed to 51.4 in December from 50.6 the previous month, its highest level since March 2014.

Manufactutring activity in #France picked up pace in Dec, with PMI hitting 21 month high https://t.co/FvXrkpWETw pic.twitter.com/6eH6MCGQGV

French PMI shows manufacturing expansion up to 21-month high in Dec; still only modest & slightly less than first reported (51.4 vs 51.6)

8.56am GMT

A strong performance in December meant Italy's manufacturing sector ended 2015 by growing at the fastest rate since early 2011.

The Markit PMI index came in at 55.6 in December, up from 54.9 the previous month and the best reading since March 2011. There was a sharp and accelerated increase in production levels at manufacturers.

The headline PMI maintained its recent ascent in December, moving to its highest level since March 2011. This completes what is a drastic turnaround from the situation just one year ago when the index was languishing below the 50.0 mark as the economy contracted.

Since then, a weak euro, recovering domestic demand and falling global commodity prices have provided the necessary tailwinds to get things moving.

8.38am GMT

The weak Chinese data has, inevitably, hit metal prices on concerns about a slowdown in demand.

And that in turn has meant shares in mining companies are among the day's biggest fallers so far, with Anglo American down 5%, Glencore 4% lower and Antofagasta off 3%.

8.26am GMT

Spanish manufacturing activity was virtually unchanged in December, but both output and new orders rose at sharper rates than in November.

The Markit purchasing managers' index came in at 53 last month, down from 53.1 in November and slightly below forecasts.

Manufacturing activity growth picking up again in #Spain but well below rate seen last year https://t.co/lj52Ir317t pic.twitter.com/tD7UcnS6MZ

Spanish PMI down slightly to 53.0 in Dec from 53.1 in Nov but masks further pick-up in output & new orders growth after improvement in Nov

8.16am GMT

With the FTSE 100 now down around 2%, market analyst Tony Cross of Trustnet Direct said:

It might be a new year as far as the calendar is concerned, but the market seems unwilling to be taking a fresh view. Disappointing manufacturing data out of China overnight resulted in such a marked fall for domestic stocks that trading was suspended in Shanghai for the remainder of the session, so there can be no surprise that many of the mining stocks in London have once again been left wearing more than their fair share of losses in early trade in what is by all accounts a sea of red numbers. One notable exception here is Randgold Resources - the equity slump in China is driving gold prices sharply higher, leaving the stock as the only winner a few minutes into the day.

A degree of volatility was probably to be expected this morning as normal trading conditions resume, but it appears that the big sell-off is being driven largely by the overnight news out of Asia, rather than any New Year's hangover of the so-called Santa rally we saw start less than two weeks ago.

8.15am GMT

With further tensions in the Middle East, notably between Saudi Arabia and Iran after the execution of the Saudi Shia cleric Sheikh Nimr al-Nimr, crude prices have edged higher.

Brent crude is currently up 0.7% at $37.57 a barrel, and would probably have been higher if not for the weak Chinese data.

8.09am GMT

In the wake of the Chinese data disappointment, European markets have opened sharply lower.

The FTSE 100 has fallen 87 points or 1.4%, while Germany's Dax has dropped 2.8% and France's Cac is down 1.2% and Spain's Ibex has lost 1.3%.

8.04am GMT

More on Chinese manufacturing:

Chart/quote (Markit): China's manufacturing sector continues to contract; PMI weaker than expected - pic.twitter.com/E1975aER7x

7.55am GMT

Ahead of the UK PMI figures, here's a preview from Howard Archer of IHS Global Insight:

The manufacturing purchasing managers' survey (out on Monday) is likely to show modest overall expansion in December, although it is unclear to what extent activity may have been affected by the flooding. Specifically, we expect the manufacturing purchasing managers' index (PMI) to have edged back further to 52.5 in December after dipping to 52.7 in November from 55.2 in October (which had been the best performance since June 2014 and a sharp improvement from 51.7 in September).

Even so, this would result in the PMI averaging 53.5 in the fourth quarter, which would be markedly above the third quarter average of 51.8 and clearly above the 50.0 level indicates flat activity.

7.50am GMT

The weak Chinese data and the subsequent plunge on the country's stock markets is likely to have a negative impact on European shares:

Our European opening calls: $FTSE 6174 down 68 $DAX 10499 down 245 $CAC 4571 down 67 $IBEX 9397 down 147 $MIB 21058 down 361

7.49am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial market, the eurozone and business.

It's a good day for data junkies, with snapshots of December's manufacturing figures from the UK, US and Europe.

China's latest PMI data implies more stimulus may be required in 2016. The surprise monthly drop in the Caixin report comes off the back of the official manufacturing PMI that saw factory activity shrink for the fifth month in December with a reading of 49.7, up slightly from November. A big swing factor for this coming year will be whether Beijing makes better use of its ability to stabilise the Chinese economy. The government has been walking a tightrope of growth stabilisation and economic reform. The way Chinese authorities lean in 2016 could determine whether market's have a good year or not.