Overnight Markets Tank: Chinese Stocks Halted

Steve Kanaval |

Overnight markets were getting crushed on the first day of trading for US investors. We wake up to limit down markets in China which drag down every index on the globe. Circuit breakers were utilized for the first time as a tool to keep markets from coming unglued, and this seems to be working. Markets settled down a bit before global trading begins. US portfolio managers are arriving from holiday and see most larger ETF's trading down 2%.

The Shenzhen Composite had its worst day since early 2007, closing down 8.2 percent. The Shanghai Composite (Shanghai Stock Exchange) ended down 6.86 percent and trading on both exchanges was temporarily halted as the authorities implemented a "circuit breaker" for the first time. US futures markets will open down at least 2% if the futures markets stay where they are now. Most major US Indexes have sell side pressure as I write. Many think this will be absorbed prior to market opening and mitigate the Chinese selloff. Important to recall the Sell off in August which sent US markets down 12% in the summer mini crash. We will be watching this here at Equities as we begin trading for 2016.

In Europe, the pan-European STOXX 600 (STOXX: .STOXX) was down over 2.4 percent in morning trade with Germany's DAX (XETRA: .GDAXI) slumping over 3 percent. Mining stocks were down by almost 4 percent in China.

Fanning the flame are rising tensions between Iran and Saudi Arabia which prompted little risk premium to oil prices on Monday. Prices moved higher after a breakdown in diplomatic ties that could still lead to supply restrictions in the Middle East. Saudi Arabia severed diplomatic ties with Iran over the weekend after Iranian protesters stormed Saudi Arabia's embassy in Tehran Sunday following Saudi Arabia's execution of Shiite cleric Nimr al-Nimr on Saturday.

In the U.S., a PMI manufacturing index is due at 9:45 a.m. ET and a ISM manufacturing Index is due at 10 a.m. ET. San Francisco Fed President John Williams will be speaking on the implementation of macroprudential policies by central banks at the AEA Annual Meeting in California at 5:30 p.m.

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