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Stocks hit by China woes, nuclear test

Wednesday, January 06, 2016 - 01:40

World stocks fall for the fifth straight day as China fuels fears about its economy by allowing the yuan to weaken further. As Grace Pascoe reports a nuclear test by North Korea added to a growing list of geopolitical worries.

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The fallout from a nuclear test in North Korea hit South Korean stocks and its currency. Japan's Nikei also extended losses to close down 1 percent. All that after two days of turmoil in China. CIBC's Jeremy Stretch. (SOUNDBITE) (English) CIBC, HEAD OF FX STRATEGY, JEREMY STRETCH, SAYING: "We're on the third trading session of the year and we've seen three significant reasons why markets should remain relatively risk averse. Obviously we had the Saudi and Iranian tensions earlier in the week. We've seen all the Chinese equity-related concerns. And now of course we have North Korea added once again into the mix." It was China's currency which was the new cause for concern. The central bank set the yuan's official midpoint rate at its weakest level in 4-1/2 years. That left traders and economists worrying the world's second-biggest economy is even weaker than had been expected. (SOUNDBITE) (English) CIBC, HEAD OF FX STRATEGY, JEREMY STRETCH, SAYING: "I think there is a degree of uncertainty to the Chinese policy response, but I think markets are perhaps over-estimating and over-playing the degree of slow down in the Chinese economy. Yes those service sector numbers overnight were relatively disappointing and I think it is still prudent to suggest the economy is decelerating, yes, but it isn't moving towards a freefall." China's blue chip shares actually rose - helped by state media reports that a selling ban on major shareholders would remain in place for longer than originally planned But falls elsewhere in Asia were mirrored in Europe And pressure was also back on oil. Crude prices hit new 11-year lows as the Saudi Arabia dispute with Iran made the chances of a production cut seem less likely.

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Stocks hit by China woes, nuclear test

Wednesday, January 06, 2016 - 01:40