China's stock market benchmark plunged 5.5 per cent today and other Asian markets were off sharply after the Dow Jones industrials on Wall Street plummeted more than 1,000 points, deepening a week-long sell- off.
Asian markets followed Wall Street down after the Dow entered "correction" territory for the first time in two years.
The Shanghai Composite Index dipped 5.5 per cent but recovered slightly to end morning trading down 4.1 per cent at 3,127.91. Tokyo's Nikkei 225 was off 3.2 per cent at 21,180.28 and Hong Kong's Hang Seng fell 4.2 per cent to 29,142.87. Benchmarks in Australia, South Korea and Southeast Asia also retreated.
Financial analysts regard corrections as a normal market event but say the latest plunge might have been triggered by a combination of events that rattled investors. Those include worries about a potential rise in US inflation or interest rates and whether budget disputes in Washington might lead to another government shutdown.
"With financial markets vulnerable at the moment, this was not great timing for such political brinksmanship." Chinese markets fell despite unexpected strongly trade data yesterday.
In Europe, markets were unnerved yesterday by the Bank of England's indication that it could raise its key interest rate in coming months due to stronger global economic growth.
Germany's DAX lost 2.6 per cent while France's CAC 40 ended down 2 per cent. Britain's FTSE 100 fell 1.5 per cent. After hitting a high two weeks ago, US stocks started to tumble last week after the Labor Department said workers' wages grew at a fast rate in January.
Investors worried rising wages will hurt corporate profits and could signal an increase in inflation that could prompt the Federal Reserve to raise interest rates at a faster pace, putting a brake on the economy.
Since then, the Dow and the Standard & Poor's 500 have fallen 10 per cent, Wall Street's traditional definition of a correction.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)