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A woman takes a nap as a man looks at an electronic board displaying stock prices at a brokerage house in Beijing, Monday, Jan. 4, 2016. Shanghai's stock index plunged nearly 7 percent on Monday, sparking a halt in trading of Chinese shares, after weak manufacturing data and Middle East tensions weighed on Asian markets. (AP Photo/Andy Wong)
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Global stocks sink after Shanghai index dives 7 percent

Andy Wong

Global stocks sink after Shanghai index dives 7 percent

Global stock markets start 2016 on grim note as Shanghai index dives 7 percent, trading halted

SEOUL, South Korea (AP) — Chinese stocks plunged nearly 7 percent Monday, triggering an emergency trading suspension and giving global markets an unnerving start to 2016. Weak Chinese manufacturing and Middle East tensions were catalysts for the sell-off.

The Shanghai Composite Index dived 6.9 percent to 3,296.66 on the first trading day of the year. The index was at its lowest level in nearly three months.

The official Xinhua News Agency said the Shanghai and Shenzhen stock markets halted trading for the remainder of Monday to avert steeper falls. It was the first time China used the “circuit breaker” mechanism it announced late last year.

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In early European trading, Britain’s FTSE 100 slipped 1.9 percent to 6,123.91 and Germany’s DAX tumbled 3.3 percent to 10,389.11. France’s CAC 40 slumped 2.1 percent to 4,537.70. Futures augured losses on Wall Street. Dow futures fell 1.5 percent and S&P 500 futures dropped 1.3 percent.

Authorities have been trying for months to restore confidence in Chinese stocks after a plunge in prices in June rattled global markets and prompted a panicked, multibillion-dollar government intervention. Beijing is gradually unwinding emergency controls that included a freeze on new stock offerings.

Weak manufacturing data was behind the sell-off Monday along with Middle East tensions, which pushed up oil prices.

Huang Cengdong, an analyst for Sinolink Securities in Shanghai, said selling accelerated as investors tried to lock in trades before activity was halted.

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He expects more selling in coming weeks ahead of corporate earnings reports.

“The market will not improve because there will be heavy selling in the near future,” said Huang.

Elsewhere in Asia, Japan’s Nikkei 225 tumbled 3.1 percent to close at 18,450.98 and Hong Kong’s Hang Seng retreated 2.7 percent to 21,327.12. South Korea’s Kospi closed 2.2 percent lower at 1,918.76. Stocks in Australia, Taiwan and Southeast Asia were also lower.

The Caixin/Markit index of Chinese manufacturing, which is based on a survey of factory purchasing managers, fell to 48.2 in December from 48.6 the previous month, marking contraction for the 10th straight month.

It was the latest sign of the headwinds facing China’s economy that add to a downbeat outlook for Asian exporters. On Friday, an official manufacturing index also showed a persistent contraction in factory activity despite Beijing’s stimulus measures.

China’s factory data is “still a long way off stirring up cheer about global demand recovery,” said Mizuho Bank Ltd. in a daily commentary. “Asian exporters are expected to continue struggling with exports contraction and growth prospects dampened by related manufacturing gloom.”

Escalating tensions in the Middle East pushed up the price of oil, analysts said.

Saudi Arabia said Sunday it is severing diplomatic relations with Iran, a development that could potentially threaten oil supply. The world’s largest oil supplier executed a prominent Shiite cleric that prompted protesters to set fire to the Saudi Embassy in Tehran and Iran’s top leader to criticize Saudi Arabia.

“Oil markets will be concerned that this could be an incremental step in a deteriorating political situation that might ultimately threaten world oil supply,” Ric Spooner, chief analyst at CMC Markets, said in a commentary.

Benchmark U.S. crude added 14 cents to $37.19 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 36 cents to close at $37.04 per barrel on the last trading day of 2015. Brent crude, used to price international oils, rose 20 cents to $37.48 a barrel in London.

In currencies, the dollar weakened to 118.98 yen from 120.26 yen. The euro rose to $1.0914 from $1.0861.

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AP researcher Fu Ting in Shanghai contributed.

First Published: January 4, 2016, 11:25 a.m.

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A woman takes a nap as a man looks at an electronic board displaying stock prices at a brokerage house in Beijing, Monday, Jan. 4, 2016. Shanghai's stock index plunged nearly 7 percent on Monday, sparking a halt in trading of Chinese shares, after weak manufacturing data and Middle East tensions weighed on Asian markets. (AP Photo/Andy Wong)  (Andy Wong)
An investor places her leg on a bench near an electronic board displaying stock prices at a brokerage house in Beijing, Monday, Jan. 4, 2016. Shanghai's stock index plunged nearly 7 percent on Monday, sparking a halt in trading of Chinese shares, after weak manufacturing data and Middle East tensions weighed on Asian markets. (AP Photo/Andy Wong)  (AP)
A woman's handbag and bottles of Chinese tea are placed on a booth with an electronic board displaying stock prices at a brokerage house in Beijing, Monday, Jan. 4, 2016. Shanghai's stock index plunged nearly 7 percent on Monday, sparking a halt in trading of Chinese shares, after weak manufacturing data and Middle East tensions weighed on Asian markets. (AP Photo/Andy Wong)  (Andy Wong)
A man takes a nap near at an electronic board displaying stock prices at a brokerage house in Beijing, Monday, Jan. 4, 2016. Shanghai's stock index plunged nearly 7 percent on Monday, sparking a halt in trading of Chinese shares, after weak manufacturing data and Middle East tensions weighed on Asian markets. (AP Photo/Andy Wong)  (Andy Wong)
A woman walks past an electronic board displaying stock prices as she leaves a brokerage house in Beijing, Monday, Jan. 4, 2016. Shanghai's stock index plunged nearly 7 percent on Monday, sparking a halt in trading of Chinese shares, after weak manufacturing data and Middle East tensions weighed on Asian markets. (AP Photo/Andy Wong)  (Andy Wong)
Women chat at each other as an investor checks on stock prices at a brokerage house in Beijing, Monday, Jan. 4, 2016. Shanghai's stock index plunged nearly 7 percent on Monday, sparking a halt in trading of Chinese shares, after weak manufacturing data and Middle East tensions weighed on Asian markets. (AP Photo/Andy Wong)  (Andy Wong)
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A currency trader walks by the screens showing the foreign exchange rates between the U.S. dollar and South Korean Won at the foreign exchange dealing room in Seoul, South Korea, Monday, Jan. 4, 2016. (AP Photo/Lee Jin-man)  (Lee Jin-man)
A currency trader walks by the screens showing the foreign exchange rates, left, and the Korea Composite Stock Price Index (KOSPI), left, at the foreign exchange dealing room in Seoul, South Korea, Monday, Jan. 4, 2016. (AP Photo/Lee Jin-man)  (Lee Jin-man)
A currency trader looks at the computer monitors at the foreign exchange dealing room in Seoul, South Korea, Monday, Jan. 4, 2016. Asian stock markets started 2016 on a weak note Monday as poor manufacturing data from the world's second-largest economy and escalating tensions in the Middle East weighed on investor sentiment. (AP Photo/Lee Jin-man)  (Lee Jin-man)
Guests watch an electronic stock board showing the first day trading of the year figures during a ceremony marking the start of this year's trading in Tokyo, Monday, Jan. 4, 2016. (AP Photo/Eugene Hoshiko)  (Eugene Hoshiko)
Guests watch an electronic stock board showing the first day trading of the year figures during a ceremony marking the start of this year's trading in Tokyo, Monday, Jan. 4, 2016. (AP Photo/Eugene Hoshiko)  (Eugene Hoshiko)
South Korean Chairman of the Financial Services Commission Yim Jong-yong, second from right, is seated with other participants during the opening of the 2016 trading year at the Korea Exchange in Seoul, South Korea, Monday, Jan. 4, 2016. The Korea Composite Stock Price Index (KOSPI) opened at 1,954.47. (AP Photo/Lee Jin-man)  (Lee Jin-man)
People walk past an electronic stock board of a securities firm on the first business day of the year in Tokyo, Monday, Jan. 4, 2016. Asian stock markets started 2016 on a weak note Monday as poor manufacturing data from the world's second-largest economy and escalating tensions in the Middle East weighed on investor sentiment. (AP Photo/Eugene Hoshiko)  (Eugene Hoshiko)
Stocks traders blow their horns during the ceremonial ringing-of-the-bell to usher the start of trading for the year at the Philippine Stock Exchange at the financial district of Makati city, east of Manila, Philippines, Monday, Jan. 4, 2016. (AP Photo/Bullit Marquez)  (Bullit Marquez)
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