Great fall of China: Shanghai and Tokyo markets plummet for a second day

Markets have plummeted in Asian markets for a second day as China’s slowing economy continues to tear through financial markets around the world.

Nearly £75billion was wiped off the value of Britain’s leading companies yesterday, on what was the worst day for the London stock market since March 2009 – in the depths of the Great Recession.

The sell-off – which was mirrored across Asia, Europe and the United States – came after the Chinese stock market plunged 8.5 per cent on what was named as ‘The Great Fall Of China’. Analysts described ‘a day of massive panic’ on global markets.

This morning, Shanghai stocks tumbled a further 6.41 per cent in early trading, while Tokyo shares also fell 4.13 per cent.

The Shanghai Composite Index fell to 3,004.13 in the first minutes of trading, but were down 4.33 percent by the break. The smaller Shenzhen Composite Index also slumped more than 6 percent in early trading.

Elsewhere, other Asian markets were rebounding with Japan’s Nikkei reversing early losses and rising 0.5 per cent to 18,620.89. Hong Kong’s Hang Seng added 1.1 per cent while South Korean and Australian stocks also gained.

Last night, Chancellor George Osborne warned that Britain was ‘not immune’ from the crisis, which he described as a ‘cause for real concern’.

And former US Treasury Secretary Larry Summers last night sounded the alarm about the threat to the global economy, saying it ‘could be in the early stages of a very serious situation’ – as it was in 2008 when the banking system stood on the brink of collapse.

It was believed last night that more than one trillion US dollars (£634billion) had been wiped from the value of shares worldwide on what other commentators described yesterday as ‘Black Monday’.

There was speculation that the fragile nature of the world economy could delay any move by the Bank of England to raise interest rates in the coming months

Mr Osborne warned the ‘open’ nature of Britain’s economy, which now enjoys billions of pounds of investment from China, meant the recovery could be put in jeopardy.

And he said the turbulent conditions underlined the need for restoring order to Britain’s battered public finances. ‘Everyone’s concerned about the situation in Asian financial markets,’ Mr Osborne said during a visit to Helsinki.

‘I would take it as a reminder that we are not immune from what happens in the world. It’s all the more reason why countries like Britain… need to get their own house in order.

‘You don’t know where the next crisis is coming from, you don’t know where the next shock is going to come from in the world.

‘Britain is a very open economy, we’re probably the most open of the world’s largest economies. And so we are affected by what happens; whether it’s problems in the eurozone, problems in Asian financial markets.’ 

Concern about China’s slowing economy and over-inflated stock market has been growing for months. Its communist government has intervened in recent days to try to take the heat out of the situation by devaluing its currency.

But yesterday the bubble appeared to burst. The FTSE 100 index tumbled as much as 6.6 per cent before closing down 288.78 points or 4.67 per cent at 5898.87 yesterday.

The slump wiped £73.9billion off the value of blue chip companies as household names from Vodafone and BP to Rolls-Royce and Marks & Spencer saw their share prices slashed.

The Footsie is now at its lowest level since the end of 2012 having lost £214.2billion of value in just ten days – the second longest sell-off in history following an 11-day slump in January 2003. It has lost 17 per cent of its value or £308.3billion since hitting an all-time high above 7100 just four months ago.

It is a disaster for the vast majority of workers with pensions. Their nest eggs are exposed to the stock market through funds linked to the Footsie.

David Madden, a market analyst at City trading firm IG, said: ‘The panic that started in China is highly contagious. European stock markets have been crushed by the fear that China is about to crumble. The sea of red on trading screens is reminiscent of the credit crisis. Dealers don’t know what to do with themselves because the market moves are so enormous and erratic.’

The mayhem in London was echoed in Europe where the Dax tumbled 4.7 per cent in Frankfurt and the Cac was down 5.4 per cent in Paris. On Wall Street, the Dow Jones Industrial Average tumbled more than 1,000 points in early trading before clawing back some of the losses.

Jeremy Cook, chief economist at currency firm World First, described it as ‘a day of massive panic’ on global markets as the rout in China sent shockwaves around the world.

Mike McCudden, an analyst at stock broker Interactive Investor, said: ‘The impact of The Great Fall of China will be remembered in the nightmares of investors the world over. We have witnessed carnage as equity indices the world over fell like dominoes.’

David Buik, a markets analyst at stock broker Panmure Gordon, said: ‘Conditions will remain very volatile up until Christmas. This is such dispiriting news for savers and pensioners.