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DAX plunges below 10,000

January 7, 2016

Germany's stock market index has tumbled more than 2 percent following a heavy sell-off on Asia's stock markets on heightened tensions over China's weak economy. The DAX slump also led other European shares lower.

DAX Börse Frankfurt
Image: Reuters/Staff/remote

The German blue-chip shares index slumped to 9979 points on Thursday, down 2.29 percent from the previous day.

The index had dropped to 9,996 points in opening trade at the Frankfurt Stock Exchange - some 300 points lower than Wednesday's closing, and falling below the psychologically important 10,000-point threshold.

The DAX, which comprises Germany's 30 most valuable companies, fell to its lowest level since October and was some 20 percent below a record high reached in April last year.

The slump in German shares also led the FTSE 100 index and the eurozone's blue-chip Euro STOXX index lower.

The market sell-off in Europe came on the heels of a depreciation of the Chinese yuan, sending currencies across the region reeling and domestic stocks tumbling.

Andreas Clenow, chief investment officer at ACIES Asset Management, said the situation in China was looking "pretty ugly."

"We've been scaling down equity positions. It's time to take a step back to re-evaluate the situation," he told the news agency Reuters.

China growth fears

Chinese markets were suspended Thursday for the second day this week after they fell more than 7 percent. This happened because the People's Bank of China (PBOC) again surprised markets by setting the official midpoint rate on the yuan, also known as the renminbi (RMB), at 6.5646 per dollar, the lowest since March 2011.

Investors have expressed fears that the yuan's rapid depreciation could mean China's economy is even weaker than had been imagined.

"The extent of the slowdown in China is certainly a worry. Investor sentiment is very fragile at the moment," Terry Torrison, managing director at Monaco-based McLaren Securities told the news agency AFP.

The worries over China hit mining stocks particularly hard, since China is the leading global consumer of metals, with Anglo American slumping 8 percent while Glencore fell 5.6 percent. Companies that export to China, such as carmakers, also fell sharply, with Germany's BMW down 4.9 percent.

uhe/tk (AFP, Reuters, dpa)