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Global Economy impacted by China troubles: U.S., Chinese Manufacturing Activity Tanks, And The World Is Getting Worried

Fears escalated MondayJanuary 4, 2016  that the global economy could struggle more than expected this year — a prospect that contributed to a plunge in financial markets.

The anxiety was heightened by reports that manufacturers extended their slumps last month in the United States and China, the world's two largest economies. Factory activity contracted for a second straight month in the United States and for a 10th straight month in China. In Canada, RBC's PMI showed manufacturing shrinking for the fifth straight month.

By midafternoon, the Dow Jones industrial average had sunk more than 400 points — over 2 per cent — though the fall was also due in part to rising tensions in the Middle East. Chinese stocks fell 7 per cent Monday before trading was halted. The Toronto Stock Exchange's S&P/TSX composite index was down 82.80 points, taking the index to 12,927.15, after falling as much as 262 points earlier in the session.

Not all the news was bad. A cheaper euro has helped European manufacturing, which expanded at the fastest pace in 20 months in December, according to data firm Markit.

Still, China's persistent sluggishness may be causing broader damage than previously thought, analysts say. China's government is trying to shift its economy toward domestic consumption and away from a reliance on exports and investment in roads, factories and real estate.

Read more: U.S., Chinese Manufacturing Activity Tanks, And The World Is Getting Worried

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