China shares fall another 5%, Europe slips back as oil tumbles - as it happened
All the latest economic and financial news, as Shanghai stocks slide again despite Beijing's claims that its financial system is 'largely stable and healthy'
- Latest: Rolls Royce sales drop 54% in China
- Relief as yuan strengthens
- China's stock market falls 5%
- Oil falls, dragging ruble down too
6.06pm GMT
For a while it looked like European shares were going to shake off their worries about China, despite a 5% fall in that country's stock market after the weekend's inflation figures.
But with oil continuing to plunge - down to a new 12 year low at one point - investors found themselves facing another tricky day. The FTSE 100 fell to a three year low, while other European markets also ended in the red. And ahead of the US reporting season, Wall Street seems to be struggling to find direction. Tony Cross, market analyst at Trustnet Direct, said:
Looking ahead, the US quarterly earnings season gets underway with Alcoa reporting after the close tonight, whilst tomorrow morning UK manufacturing and industrial production data will be under scrutiny in the morning as traders optimistically look for some overdue good news from the domestic economy. Attention will also be on Chinese equities, although a relative absence of high profile data from Beijing in the short term may help calm nerves here.
5.59pm GMT
2016 already looking ugly for commods. Here are the worst performers so far pic.twitter.com/uuKGKYDudn
4.56pm GMT
The FTSE 100 has fallen to its lowest level since early December 2012, down 40.61 points to 5871.83.
4.22pm GMT
Given the weak oil price - and copper falling to its lowest level since 2009 on continuing concerns about the Chinese economy - markets are now edging lower.
On Wall Street the Dow Jones Industrial Average is down marginally, while the FTSE 100 is off 22 points and Germany's Dax and France's Cac are both down around 15 points after a rather more positive start to the day.
4.19pm GMT
Oil continues to fall, and has taken the shine off any early stock market gains.
Brent crude is 4% lower at $32.17 a barrel while US crude is down below $32 to i12 year lows. The general concerns about oversupply and lack of demand have been brought into focus by a Morgan Stanley report saying the oil price could fall to $20 a barrel, as mentioned earlier. The bank said crude could fall further due to devaluation of the Chinese currency:
In an oversupplied market, there is no intrinsic value for crude oil. The only guide posts are that the ceiling is set by producer hedging while the floor is set by investor and consumer appetite to buy. As a result, non-fundamental factors, such as the US dollar were arguably more important price drivers in 2015. In fact, when we assess the more than 30% decline in oil since early November, much of it is attributable to the appreciation in the trade-weighted US dollar.... With the oil market likely to remain oversupplied throughout 2016, we see no reason for this trading paradigm to change.
Given the continued US dollar appreciation, $20-25 oil price scenarios are possible simply due to currency....For every 1% move in the trade-weighted US dollar, we tend to see a 2-4% move in Brent. Therefore, a 3.2% increase in the US dollar, as implied by a 15% yuan devaluation, could push down oil 6-15% ($2-5 a barrel), which could put oil in the high $20s. If other currencies move as well, the move in the US dollar and oil could be even greater. Hence, we remain bearish, even after the notable downward move already.
3.04pm GMT
Back with UK stocks and Mike Ashley's Sports Direct International is the biggest faller in the FTSE 100 at the moment, down nearly 6% at 407.4p.
The controversial company's shares plunged 15% on Friday - wiping more nearly half a billion off its market value - after it warned annual profits would be 40m lower than expected.
At the interim results, we gave the company the benefit of the doubt even though retail sales were disappointing. In view of the lack of transparency on strategy and in view that the company is likely to be eliminated from the FTSE100 over the next quarter, we are now taking a more cautious view on valuation. We are thus reducing our target price to 480p from 700p, which on our revised pre-tax profit forecasts, downgraded by around 14%, broadly values the company at 14 times full year 2016 earnings. We are, however retaining our hold recommendation on the stock, which has declined by almost 40% since the interim results announcement.
At the interims in December we downgraded 2016-18 pretax profit by between 6% and 8%. Following the trading update on 8 January we downgrade again, by 8% in 2016 and 6% in 2018. While the latest update only related to weakness over the past month we see a lack of earnings momentum in the short to medium term, and a lack of European M&A. Sports Direct has levers that it can pull, notably automating the distribution centre, but will not do so until the future shape of the business is clear.
2.43pm GMT
The US stock market is making a valiant attempt to put the problems in China behind it.
US stocks open higher; China, oil eyed https://t.co/uwJSRlWRiz pic.twitter.com/zPVjUX80T6
2.27pm GMT
A quick recap:
Fears have heightened over China's ailing economy and with confusion towards the unexpected devaluations leaving market participants questioning Beijing's overall policy intentions; global sentiment may remain heavily depressed.
The conditions are not that of a calm rising bull market or a raging bear market but a volatile sideways price range, still undecided which way to break.
1.26pm GMT
Luxury carmaker Rolls-Royce has just reported a sharp decline in sales in China
Sales to Chinese customers shrank by 54% in 2015, the company says; the latest indication that China's economy has weakened in the last year.
In China, significant headwinds impacted negatively on the entire luxury sector and Rolls"Royce was not immune to these developments.
"2015 was a year of tremendous challenge for the entire luxury industry. I am very proud of our success which was achieved against a backdrop of considerable global uncertainty."
The whole anti-corruption campaign... is very much around investigating where your money is from, to whom you are related and so on and so forth.
That of course scares people who are quite affluent, and no one wants to be visible currently in that kind of environment and people are shying away from... obvious luxury goods, and that is not only true of cars but for jewellery and for precious watches and so on."
12.56pm GMT
Britain's top tax official, Lin Homer of HMRC, has surprised us by resigning today.
As my colleague Sean Farrell points out, her tenure has been marked by criticism over the way HMRC tackled tax avoidance by large companies, among other issues:
Homer, who was made a dame in the New Year honours list, has been the subject of political controversy during her tenure.
She revealed in February that most UK clients of HSBC's Swiss business who settled with the tax authorities did so under an extraordinarily lenient agreement. Homer also apologised in November that HMRC's giant call centre had failed to answer a quarter of the 50m calls it received each year.
Related: HMRC chief Lin Homer to step down
12.12pm GMT
There are signs that China's deteriorating economy is bottoming out.
That's according to new monthly economic indicators published by the Organisation for Economic Co-Operation and Development (OECD) today, based on the latest economic data.
11.48am GMT
The financial markets could be on track for a rough year, having posted the worst start to a new year ever.
Tim Edwards, senior director of Index Investment Strategy at S&P Dow Jones Indices, has pulled together some charts showing how week 1 of the year often sets the tone.
Historically speaking, years that have started badly have more frequently ended badly - and to a greater extent than might be supposed, given the expected impact of a single week's performance. However, those who wish to divine the market's yearly performance from that of a single week might be better off waiting until September.
11.09am GMT
One bad week doesn't make a recession, but this research from JP Morgan suggests the global economy has come off the boil in the last month or so:
JP Morgan's instant tracker for global GDP down to 1.7% for Q4, dropping all the time. (Huge downgrade for Korea) pic.twitter.com/jzyY976t8D
10.58am GMT
It's situation-as-normal in the commodities market this morning, with copper dropping to its lowest price since spring 2009.
Copper slumps to lowest since April 09 pic.twitter.com/PAba6WW2W0
"Expectations coming into 2016 were for a better macro environment, but the likelihood is that we're not going to see any real rebound until well after the Chinese New Year."
10.35am GMT
Wall Street is expected to rise when trading begins in four hours time.
Dow futures now up 72 points having been down 70+ an hour ago.. Risk on theme growing here..
These numbers will still be impacted by lower oil prices and a higher dollar. However, the year-over-year comparisons on these issues are easier than in the third quarter and should result in a return to positive year-over-year growth in operating earnings.
Overall, the US economy isn't booming, profits aren't soaring and China isn't out of the woods.
10.21am GMT
Interesting developments in Greece overnight - the country has a new opposition leader.
And the new man, Kyriakos Mitsotakis, is a serious reformer with the ability to shake up the Greek economy should he take power one day.
9.58am GMT
In a week's time, high-flying members of the global elite (plus a bunch of journalists) will gather in Davos for the annual World Economic Forum (WEF).
It's a chance to discuss the global situation, cut deals, and plot the way ahead - at a crucial time for the world economy. But this year, Angela Merkel won't be there.
With a lot on her plate, she [Merkel] had already decided well before the Cologne attacks not to make her regular trip to the Davos World Economic Forum, the global leaders' gathering this month.
German govt denies @FT report Merkel canceled trip to Davos. Merkel had no plans to attend Davos this year, spokesman Seibert says. (BBG)
9.43am GMT
The recent gyrations in the markets are is forcing City economists to rip up their oil price forecasts.
"Given the continued U.S. dollar appreciation, $20-$25 oil price scenarios are possible simply due to currency.
"The U.S. dollar and non-fundamental factors continue to drive oil prices."
Oil forecasts: Societe Generale revises 2016 Brent crude price down by $11.25 (!) to $42.50 a barrel; OPEC inaction and China fears weigh
9.29am GMT
There's drama in the international currency markets, where the Chinese currency has strengthened against the US dollar.
The yuan has gained 1% in so-called 'offshore trading', reaching a one-week high of 6.6170 yuan to the US dollar.
So far European stocks fighting off risk aversion from Asia after Stoxx600 lost Eu637b last week = worst >4yrs pic.twitter.com/6dVoMhmdId
9.13am GMT
Here's our news story about today's ructions in the Asian markets:
Related: China shares fall 5% to hit three-month low
9.11am GMT
Experienced City economist and China-watcher George Magnus has written about the China crisis in the Financial Times.
He points out that the big worry isn't China's stock market, but the possibility of credit defaults.
Even though government officials speak occasionally about the need to allow corporate defaults and restructuring, and recognise bad debts in the banking system, the political and institutional blockages to such outcomes are formidable. If they could be overcome, adjustment might be softened, for example, by significant tax cuts for households and spending transfers from the state to the private sector. But the political will is not there.
Instead, all we are likely to see is more credit easing, in the wake of the six initiatives since late 2014 to cut interest rates and banks' reserve requirements, albeit to no economic effect. The credit binge, then, will continue until it can't.
China stocks another bath, PBC heavy i'vention in CNH mkt. Behind fin turbulence lurks China's credit crisis. My @FT https://t.co/CIWrX9GEK9
8.45am GMT
The oil price is heading towards new 11-year lows this morning, giving the Russian ruble another knock.
Ruble falls to 76 vs $, Moscow market down 4%. Oil price weighs heavily on Russian economy.
8.34am GMT
There's not much panic in Europe about today's selloff in China, yet anyway.
The French and Italian markets have crept higher at the opening, while Germany's DAX is only down 0.2%.
8.23am GMT
It's another wet and gloomy morning in the City.
8.13am GMT
City experts have spent the weekend fretting about China, reports Socii(C)ti(C) Gi(C)ni(C)rale's top currency analyst Kit Juckes:
If my inbox is anything to go by, the big market issue this weekend is whether the Chinese authorities can restore confidence in their ability to manage an orderly adjustment of the Yuan.
Even if China's some way from the inconsistent quartet of free trade, free capital mobility, independent monetary policy and a fixed exchange rate, they have moved closer and will struggle to find consistent policies.
Nervousness across Asian markets and fear of bigger capital outflows and a bigger FX move are going to go on haunting markets.
8.08am GMT
Today's selloff means that the Chinese stock market has now lost 15% of its value this year - over just 6 trading days.
7.56am GMT
The latest Chinese inflation figures are also fuelling worries over its economy this morning.
Figures released over the weekend showed that factory-gate prices have now fallen for 46 months in a row.
#China biggest exporter of #deflation. PPI slumped 5.9% in Dec, extending declines to a record 46th month. pic.twitter.com/l9UzRuFNIM
7.48am GMT
European stocks are expected to dip this morning:
China finishes down 5% - FTSE forecast to start around 15 points lower at 5897.
7.41am GMT
A late rush of selling in Shanghai has sent the Chinese stock market sliding to its lowest level in over three months.
Global markets are still in the grips of China fears, and it is uncertain whether the Chinese government can do enough to reassure global investors.
The People's Bank of China (PBoC) fixed the CNY largely unchanged from its position on Friday. But this halt in the weakening of the currency appears to have done very little to investors' expectations that there will be further depreciation of the currency in the near future.
The week starts w/ another #China crash: All indices closed down >5%. pic.twitter.com/XlUCwbJYJC
7.32am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Brace yourselves for another week dominated by fears over China, with a dash of stock market volatility and a weak oil price thrown in too.
"China's economic fundamentals are strong.
"Foreign exchange reserves are relatively abundant and the financial system is largely stable and healthy."
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