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Stocks Pummeled Worldwide By China, Saudi-Iran Tensions

Stock markets worldwide have started off the new year with dramatic drops, triggered by fears of slowing economic growth in China and tensions between oil titans Iran and Saudi Arabia.

After staging a 7 percent nosedive in Shanghai, stocks plunged by 4.3 percent in Frankfurt, 3.2 percent in Milan, 2.5 percent in Paris, and 2.4 percent in London on January 4.

Wall Street joined the global selloff with a decline of 1.5 percent as measures of manufacturing activity in China and the United States both showed declines and threw doubt on the strength of economic growth.

China's Shanghai Composite Index took a drubbing again in early trading on January 5, falling by 3 percent before recovering some by midday.

The selloff was fueled in part by worries about Saudi Arabia's cutting of diplomatic relations with Iran, which briefly sent oil prices surging, traders said.

"Oil markets will be concerned that this could be an incremental step in a deteriorating political situation that might ultimately threaten world oil supply," said Ric Spooner, chief analyst at CMC Markets.

Based on reporting by AP and AFP