Asian shares and currencies crashed on Monday during the first day of trading in 2016 after China factory activity contracted and its central bank guided the yuan lower whilst oil prices rose by as much as 3% due to increased tensions in the Middle East.

The biggest losses came from mainland China where shares fell 5 percent to trigger the “circuit breaker” mechanism which paused trading for 15 minutes however once reopened continued the market continued to drop causing regulators to end the day’s session early.

European shares are expected to open lower with expectations of a 1.5% drop in Germany’s DAX, a 0.7 percent drop in France’s CAC 40 and 0.6% drop in Britain’s FTSE 100.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2.5 percent, on course to post its biggest loss since 24th August last year.

Chinas central bank on Monday fixed the yuan at a 4-1/2-year low, combined with poor manufacturing surveys the market crashed.

Todays surveys came after an official one published on Friday, focused on larger, government owned firms, higlighted a fifth month of contraction.

Investors sold stocks ahead of the forthcoming expiration of a Chinese share sales ban on listed companies’ major shareholders, which had been imposed for the beginning of 2016 during the market crash last summer.
The offshore yuan fell to as low as 6.6181 to the dollar, the lowest it has been since early 2011. The onshore yuan hit its lowest since April 2011, at 6.5140.

Oil prices jumped following Saudi Arabia’s execution of a prominent Shi’ite Muslim cleric during the weekend which sparked anger in the gulf and increased geopolitical tensions in the Middle East. Riyadh cut ties with Iran after protesters overran the Saudi embassy in Tehran.

The global benchmark Brent futures, gained as high as 3.3 percent to $38.50 per barrel, the highest in about three weeks due to the ongoing tensions.