Global markets tremor spreads from east

Published on Monday 31 August 2009 21:17

THE London stock market was expected to open lower today as US stocks followed a decline in Chinese equities over fears that world markets have got ahead of themselves.

Concerns about future demand sparked the decline in China, which in turn prompted a drop in the price of crude oil.

October crude futures sank 4.4 per cent, or $3.17, to $69.57 per barrel. Shares of Chevron tumbled 1.2 per cent to $69.81 and Exxon Mobil dropped 0.8 per cent to $69.56. The S&P Energy index was down 1.8 per cent.

In China, the Shanghai Composite index fell nearly 7 per cent to a three-month low on fears that banks would rein in their lending. Recent slides in Chinese stocks have caused jitters in global stock markets – which have rallied strongly in recent months, with the S&P 500 up about 50 per cent since March.

"If the Chinese economy grows at a slightly slower rate than people were looking for, it'll have some negative overtones for us," said James Meyer, the chief investment officer at Tower Bridge Advisers in West Conshohoken, Pennsylvania.

"There's also a psychological impact. Traders were thinking what was good for China was good for the US. Now they're looking at it as if China falls, we might as well."

The Dow Jones industrial average was down 68.17 points, or 0.71 per cent, at 9,476.03. The broader Standard & Poor's 500 index fell 9.81 points, or 0.95 per cent, to 1,019.12 while the Nasdaq Composite index dropped 23.54 points, or 1.16 per cent, to 2,005.23.

Financial stocks fell, following a strong rally last week and some cautious comments from analysts.

Barron's recommended taking profits in Citigroup and said AIG shares were overpriced after gaining more than 50 per cent last week.

Citi was down 3.8 per cent at $5.03 while AIG dropped 10.7 per cent to $44.88.