Asia stocks start 2016 on weak note as Middle East weighs

Australia's financial sector posted big losses, with the Commonwealth Bank losing 1.3% to AUD$84.46 (£41.20) and Westpac Banking Corporation (NZSE: - ) sliding 1.7% to AUD$33.00.

The early end to trading on Shanghai and Shenzhen bourses, the first in the history of China's stock markets, coincided with the launch of the automatic circuit breaker, created to contain wild swings in the markets.

Aside from the ongoing conflict in Syria, the escalation of tensions between Saudi Arabia and Iran will add "a layer of complexity that will make the first quarter even more volatile as the West now has a huge dilemma in choosing a side to "support", said Lucas. "It might be the New Year, but old problems remain".

Data showed factory activity in China contracted for a tenth consecutive month in December, reigniting fears that the world's second largest economy is slowing down.

CHINA DATA: An index of China's manufacturing activity ticked up to 49.7 in December from 49.6 in November but it still remained below the 50-mark indicating contraction.

Standard & Poor's 500 Index futures fell 0.9%, reversing earlier gains. The Nasdaq composite gave up 112 points, or 2.2 percent, to 4,895.

London's benchmark FTSE 100 index sank 1.5 percent to 6,147.5 points compared with the close of its last trading day on Thursday. The currency can trade 2 per cent above or below the fix. The CSI 300 was down 6.98 percent; when that index rises or falls 7 percent, a trading halt in China's markets is triggered for the rest of the session.

The Australian share market has also closed lower on its first day trading day in 2016, in the wake of a weak lead from USA markets and profit-taking by investors.

Japan's Nikkei 225 tumbled more than 3 per cent while Hong Kong's Hang Seng retreated about 3 per cent.

Adding to these woes, the People's Bank of China fixed the yuan at a 4-1/2-year low.

Miners and carmakers declined the most among Stoxx 600 industry groups.

Shire Plc dropped 2.9 per cent as people familiar with the matter said the drugmaker is in advanced talks to acquire Baxalta Inc. for about $32 billion. "The new mechanism will not change overall trading trends".

The S&P 500 traded down 38 points, or 1.86 percent, at 2,005.

Market reforms put on hold by the crash could be delayed further if the circuit breaker fails to halt selling pressure and markets - which had recovered more than 25 percent from the pit of the crash prior to Monday's correction - head lower again.

Oil prices jumped as Saudi Arabia's execution of a prominent Shi'ite Muslim cleric at the weekend spurred regional anger and geopolitical tensions in the Middle East. Riyadh cut ties with Iran after protesters stormed the Saudi embassy in Tehran. The kiwi suffered a loss exceeding 10 percent in 2015, but dairy prices showed signs of bottoming out past year. And the stock of Imax China ended the day down 1.9 percent.

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