U.S. shares fell significantly on Thursday, causing major benchmarks to post their worst beginning of a new year ever recorded, as China’s turbulent market weighs down on assets worldwide. China’s recent round of devaluation for the yuan, which has placed the currency at its lowest in five months, has spiked concerns worldwide over the second-largest economy’s growth outlook. Trading in Shanghai shares has been halted twice this week as China’s circuit breaker policy was put into action in an effort to limit widespread declines. As investors weigh in the impact of Asia’s declines, U.S. benchmarks saw significant losses. The Dow Jones industrial average fell 392.41 points, or 2.32%, to trade at 16,514.1, the Standard & Poor’s 500 declined 47.17 points, or 2.37%, to trade at 1,943.09 and the Nasdaq Composite shed 146.34 points, or 3.03%, to end Thursday’s trading session at 4,689.43. The first four trading days of 2016 have seen the Dow Jones decline 5.2%, its worst performance since the index was introduced in 1928. Similarly, the S&P 500 fell 4.9% in the same timeframe, posting its worst start-of-the-year in the index’s history. Though the Nasdaq didn’t break any loss records, it has posted a significant 6.4% decline.
Despite yesterday’s stark declines, Friday’s early Asian trading session has seen the market recover. China lifted its circuit breaker system, allowing trading to resume, and set the yuan at a higher midpoint rate, restoring some of the lost confidence in Beijing’s ability to maintain the market. While Asian shares are still on track to post their worst weekly performance in four months, Friday’s gains pared some of the losses on offered some optimism heading into the weekend. The CSI300 index of major Shanghai and Shenzhen stocks added 2.7% and the Shanghai Composite gained 2.6%, helping the two indexes limit their weekly losses to below 10%. China’s gains lifted MSCI's broadest index of Asia-Pacific shares outside Japan, which pared earlier declines to post a 0.5% climb. Despite the last minute recovery, the index is still on track for a 6% weekly decline, its worst since August. The Japanese Nikkei bucked the Asian trend, ending with a 0.4% decline to end at its lowest point since September. The index’s total weekly declines summed up at around 7%, its worst performance in four months.
This week’s major economic data releases conclude with today’s release of European and Chinese balance of trade data, followed by Canadian unemployment, U.S. nonfarm payrolls and China’s inflation data. China’s ongoing financial troubles have put their inflation report in focus, more so after of Friday’s gains.