China’s use of its “circuit breaker” stock policy amid a slump and rising tensions in the Middle East have triggered a global stock market downfall.
China halted trading through its circuit-breaker system on Monday after a 7% drop in the CSI 300, a benchmark of the largest 300 stocks listed in Shanghai and Shenzhen. The drop is attributed to underwhelming manufacturing data pointing to shrinking factory activity and a falling currency.
The circuit-breaker system was announced in December. It triggers a 15 minute trading halt whenever there is a 5% rise or fall in the CSI 300. Trading stops for the rest of the day any time there is a 7 % move — or a 5% move in the 15 minutes before the market closes.
The consequences were felt across the region. Japan’s Nikkei 225 index dropped 3.1% and Hong Kong’s Hang Seng index fell 2.6%. A 4.4%cent fall for tech-giant Samsung contributed to South Korea’s Kospi index closing 2.2% lower.
In Europe, Britain’s FTSE 100 fell by 2%, Germany’s DAX index was 3.3% lower and France’s CAC 40 dropped 2.1%.
Tensions between Iran and Saudi Arabia have created instability in the oil market. On Saturday, the Saudi government executed Shiite cleric Nimr al-Nimr and 46 others convicted of terror-related crimes. Al-Nimr was a rabid anti-Sunni who espoused the removal of the Sunni Muslim Saudi royal family during the so-called Arab spring in 2011.
The execution caused sharp condemnation from Iran and resulted in a diplomatic deterioration. So far on Monday, Brent Crude oil prices and U.S. crude prices rose by 3% and 2%, respectively.