WASHINGTON (AP) – Fears escalated Monday 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.
By midafternoon, the Dow Jones industrial average had sunk more than 400 points – over 2 percent – though the fall was also due in part to rising tensions in the Middle East. Chinese stocks fell 7 percent before trading was halted.
The DAX index in Germany, whose export-led economy is sensitive to China’s prospects, tumbled 4.3 percent. Britain’s FTSE 100 fell 2.4 percent, France’s CAC 40 2.5 percent.
The manufacturing data made clear that the troubles that weighed on U.S. factories last year have yet to ease. Sluggish economies in major markets – from China to Europe to Japan – have depressed U.S. exports. That trend has been worsened by a strong dollar, which has made U.S. goods more expensive for foreigners.