A plunge in Chinese stocks dragged world markets lower on Friday as investors fretted over whether Beijing would take new steps to cool the world’s No. 2 economy and G 20 leaders in South Korea papered over currency tensions.
The losses in Asia and Europe followed a down day on Wall Street where Cisco Inc., the world’s largest maker of computer networking gear, rattled investors by cutting its sales forecast for a second quarter in a row.
Oil prices tumbled below $87 after big gains the previous two days and Wall Street was set to slide. Dow futures were off 110 points, or 1 percent, at 11,132. Broader S&P futures shed 13.90, or 1.2 percent, to 1,197.20.
Markets were on edge as leaders from the Group of 20 major advanced and developing nations struggled at a summit in Seoul to resolve a U.S.-China currency dispute that threatens to escalate into a global trade war.
Adding to negative sentiment was mounting speculation that Ireland one of Europe’s most financially troubled countries would not be able to cut public spending and may have to resort to a bailout.
China’s Shanghai Composite index dived 5.2 percent to 3,310.58 amid expectations of more government measures to tighten credit and slow economic growth after inflation hit a 25-month high in October. The Shenzhen Composite Index for China’s smaller second exchange slumped 6.1 percent.
“There are some rumours there might be another interest rate hike this weekend,” said Linus Yip, a strategist for First Shanghai Securities in Hong Kong. The Chinese sell-off dragged down prices elsewhere in Asia, Yip said.
In early European trading, France’s CAC-40 fell 1.9 percent to 3,792.31 and Germany’s DAX dropped 1.1 percent to 6,653.14. Britain’s FTSE 100 declined 1.1 percent to 5,749.04. Japan’s benchmark Nikkei 225 stock index ended down 136.65 points, or 1.4 percent, to 9,724.81 and Australia’s S&P/ASX 200 shed 0.8 percent to 4,692.70.
Hong Kong’s Hang Seng fell 1.7 percent to 24,270.26 and South Korea’s Kospi retreated 0.1 percent to 1,913.12. Markets in India, Singapore and Taiwan were also lower.
In Seoul, leaders of 20 major economies refused to endorse a U.S. push to get China to let its currency rise, keeping alive a dispute that has raised the specter of a global trade war. The crux of the dispute is Washington’s allegations that Beijing is artificially keeping its currency, the yuan, weak to gain a trade advantage. But the U.S. position has been undermined by its own recent policy of printing money to boost a sluggish economy, which is weakening the dollar.
In the U.S. on Thursday, the Dow Jones industrial average shed 73.94 points, or 0.7 percent, to close at 11,283.10 as the weak outlook from Cisco shook faith in the strength of the technology industry’s recovery.
In currencies, the dollar fell to 82.05 yen from 82.32 yen late Thursday in New York. The euro fell to $1.3608 from $1.3648.
Benchmark crude for December delivery slid $1.59 to $86.22 a barrel in electronic trading on the New York Mercantile Exchange. The contract settled unchanged at $87.81 on Thursday.