ASX 200 closes below 5000 for the first time since June 2013

IT HAS been a horror day of trading on the share market, with Aussie stocks dipping below the key 5000-point mark for the first time in more than two years.

The All Ords and Myer showing losses on information boards at the Australian Stock Exchange (ASX) in Sydney, Thursday, Sept. 3, 2015. Retail sales in the month fell 0.1 per cent, on a seasonally adjusted basis, to $24.31 billion, the ABS said today, with turnover lower than analyst predictions. (AAP Image/Dean Lewins) NO ARCHIVING

THE Australian share market has closed down below the key 5000-point mark for the first time in more than two years as weak Chinese manufacturing data added to global growth concerns, wreaking havoc on the big miners.

The benchmark S&P/ASX 200 index closed down 2.07 per cent at 4998.1 points after dipping as low as 4988.80 just after 2.30pm AEST. The last time the top 200 companies index closed below 5000 was June 2013.

The broader All Ordinaries index was down 98.4 points, or 1.92 per cent, at 5032.4.

The December share price index futures contract was 108 points lower at 4989, with 34,911 contracts traded.

Already down more than 1 per cent due to heavy falls on US and European markets overnight, the local market fell further just before noon.

That was caused by a key measure of Chinese manufacturing activity coming in at a new six-and-a-half-year low in September, and indicating the sector is contracting.

All sectors were lower at noon, with the big four banks all down more than 1.7 per cent and mining giants Rio Tinto and BHP Billiton down more than 2.5 per cent.

ASX final close 4998.1!!!! Doom! https://t.co/00d8j7yqaN

— Angus Nicholson (@ANicholson_IG) September 23, 2015

#ASX cant defend 5000; low of the year at 4998.1 -2.07% horror day; bearish signs are everywhere - China bears will be smiling t/ght #ausbiz

— Evan Lucas (@EvanLucas_IG) September 23, 2015

CHINESE MANUFACTURING DOWN

The latest Chinese manufacturing data was worse than economists had expected and unsettled global financial markets. Uncertainty about the extent of China’s slowdown has been on the radar of investors, particularly after the Federal Reserve mentioned China as one of its reasons for not raising interest rates last week.

The preliminary Caixin/Markit index, which is based on a survey of factory purchasing managers, fell to 47.0 in September from 47.3 in August. Numbers below 50 on the 100-point index indicate contraction.

It’s the sixth straight monthly decline for the index, which is at its lowest since March 2009, when the world was gripped by the fallout from the global financial crisis. The preliminary index reading is based on 85 per cent of survey respondents. The final figure, which is often revised, is due by October 1.

Activity may have been weighed down by temporary factory closures and a two-day national holiday for a military parade in Beijing in early September, analysts said.

China’s factories cut output, staff numbers and prices at a faster pace as both new export orders and overall new orders fell, the report said. Chinese manufacturers employ many millions of workers and represent a big part of the overall economy but they are feeling the effects of a weak recovery in major markets overseas.

“Today’s data highlights the considerable headwinds to growth from soft global demand,” HSBC greater China economist Julia Wang said.

The data will add to the pressure on China’s communist leaders as they try to prevent growth from falling too sharply. Service industries have been growing rapidly but economists say Beijing may still need to speed up government spending to achieve the full year growth target of 7 per cent.

China’s economic growth held steady at 7 per cent in the most recent quarter, which was its weakest performance since 2008.

Growth has fallen from the double-digit rates of the previous decade as Beijing tries to wean the economy off its reliance on trade and investment in favour of domestic spending on goods and services but the transition is challenging.

Policymakers in Beijing have cut interest rates five times since November and also slashed bank reserve requirement ratios in a bid to bolster economic growth.

“The decline indicates the nation’s manufacturing industry has reached a crucial stage in the structural transformation process,” said He Fan, chief economist of Caixin Insight Group.