NEW YORK, June 24 (Xinhua) -- China's growth worries and credit tightening sent ripples across global stocks on Monday with major U.S. stock indices, in particular, dropping 1 percent on the back of a 2-percent decline last week.
Traders believe that although markets of the two economies are more interrelated, China will not be the sole factor to impact the U.S. market. U.S. stocks, which are oversold on a near-term basis, will retain its resilience and bounce back.
GLOBAL STOCKS SLUMP ON CHINA WORRIES
A cash crunch in China's banking sector as well as China's slowing growth fueled fears of a possible tapering of the U.S. Federal Reserve's quantitative easing later this year, which sent global stocks to plunge on Monday
The Dow Jones Industrial Average slipped 139.84 points, or 0.94 percent, to 14,659.56 points. The S&P 500 shed 19.34 points, or 1.21 percent, to 1,573.09 points. The Nasdaq Composite Index fell 36.49 points, or 1.09 percent, to 3,320.76 points.
"Today's initial sell-off (of the U.S. stock market) was just about people trying to guess when the Fed was actually going to stop the bond- buying program, it was also about what's going on in China," Keith Bliss, senior vice president and director of sales and marketing at Cuttone & Company, told Xinhua.
Joseph C. Greco, managing director-trading & sales at Meridian Equity Partners in New York, said, "Clearly, right now we are chasing each other's tail down lower."
China's benchmark Shanghai Composite Index tumbled 5.3 percent on Monday, the biggest drop since August 2009. The Chinese benchmark stock index lost over 20 percent from its previous peak to enter a bear market.
Other Asian markets and European shares also experienced a broad-based sell-off on Monday amid China's credit tightening, propelling the fear gauge of European investors to a four-month high.
The People's Bank of China (PBOC), China's central bank, said Monday in a statement that the country's liquidity remains at a "reasonable" level and commercial banks should strengthen liquidity management. The statement came in a day after the PBOC pledged to continue to implement a prudent monetary policy while fine-tuning it at a proper time.
The PBOC dampened market expectations that it would inject cash into the financial system to cool down spiking domestic inter-bank lending rates and address a slower economic growth.
Adding to the woes, investment bank Goldman Sachs downgraded its forecasts on China's economic growth to 7.4 percent from the previous 7.8 percent for 2013 and cut its 2014 GDP growth to 7.7 percent from 8.4 percent.
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