All eyes are on China and its turbulent stock market.
Stocks in China were volatile Friday after rising about 3% as trading opened. But then stocks sank almost 2% in the first 15 minutes before bouncing higher again.
As of 10 a.m. local time, the Shanghai Composite Index was up 1.2%, while the Shenzhen Composite up 0.5%.
On Thursday, stocks in China plunged 7%, triggering a halt within the first half hour of trading. For the second time this week, regulators closed the markets for the rest of the day.
In a bid to calm nervous investors, Chinese officials suspended the halting mechanism, which had been in effect for only four days. Regulators scrapped the so-called “circuit breakers” because many believe they were fueling sharp trading losses — rather than taming them.
Peter Boockvar, chief market analyst at The Lindsey Group, said removing the circuit breakers could take some short-term pressure off Chinese stocks — but won’t be a cure-all.
“People now don’t have that same deadline to sell…but China’s stock market is going to go where it’s going to go,” said Boockvar.
China’s disarray has caused chaos in global markets.
In the U.S., stocks have had one of their bleakest starts to a year. The wave of selling has knocked the Dow down 911 points, or 5%, so far this year. That’s the worst four-day start to a year on record, according to FactSet stats that go back to 1897.
Both the Dow and Nasdaq officially closed on Thursday in a “correction,” signaling the first 10% drop from prior highs since last summer.
European stocks aren’t faring any better.
The DAX, Germany’s benchmark stock index, is off 7% for the year already and France’s CAC 40 is down 5%. On Thursday, German carmakers that rely on exports to China were leading the losses — Volkswagen slid 5%, while BMW and Daimler both lost around 4% each.
It’s not helping that crude oil prices continue to tumble. They plummeted to a new 12-year low Thursday.
Investors are also alarmed by the steep decline in China’s currency. The country’s central bank set the yuan’s value at the weakest level since March 2011. The currency devaluation may help boost growth, but it can hurt asset values and cause money to exit the country.
To that point, China’s central bank said it burned through a record $108 billion in foreign-exchange reserves in December in an effort to slow the sharp devaluation of its currency. It still has $3.3 trillion in cash, but that’s the lowest level since late 2012.
While investors should focus on China’s economy, not its turbulent equity market, the economy isn’t looking that great either. New reports released this week reinforce concerns that China is slowing down more than investors realized.
CNNMoney’s Fear & Greed Index, which is calculated based on several market indicators, is also flashing “fear.” Just a week ago it was in “neutral” territory.
— Jonathan Stayton and Ivana Kottasova contributed to this report.
