China's stunning share market rout stings global equities

China's top securities regulator says the government will continue to buy shares as an unprecedented rescue plan already in place appeared to be sputtering. Photo: Reuters

The biggest rout in Chinese shares in eight years stoked concerns on Monday over slowing growth in the world's No. 2 economy, knocking down global equities and the prices of key commodities.

The dollar eased on safety bidding for other major currencies. The euro topped $US1.11 for the first time in two weeks, boosted further by strong German business sentiment data.

Wall Street was down on worries over China's slowing growth, crystallised by a stunning 8.5 per cent fall in shares in Shanghai that also rattled equity markets in Europe and Asia.

China's top securities regulator quickly said the government would continue to buy shares to stabilise the stock market as an unprecedented rescue plan already in place appeared to be sputtering.

Wall Street, SPI lower as commodities take a hit

The Dow Jones industrial average was down 123.2 points, or 0.7 percent, to 17,445.33, the S&P 500 fell 9.71 points, or 0.47 per cent, to 2069.94 and the Nasdaq Composite gave up 40.79 points, or 0.8 per cent, to 5047.84.

Eight of the 10 major S&P 500 sectors were lower.

Share indices in Frankfurt and Paris tumbled more than 2.5 per cent , while London's FTSE 100 ended down 1.13 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.7 per cent.

Closer to home, the SPI was down 1 per cent, or 53 points, at 5454 shortly before 6am as nervous over the Chinese economy continues to spread. The ASX 200 closed Monday 0.43 per cent, or 23.8 points higher, at 5589.

The Australian dollar was fetching US72.79¢.

Traders and investors said the equity markets declines largely came on concerns over sluggish global economic growth triggered by the Chinese equity slump.

Both copper, for which Chinese demand is an important driver, and the broader Thomson Reuters CRB commodities index hit their lowest levels in six years. Copper futures fell another 1 percent on Monday.

Oil was near four-month lows after the Chinese stock crash fuelled worries the world's biggest energy consumer may cut back and as more evidence emerged of a global crude supply glut.

Brent crude fell US91¢ to $US53.69 a barrel, after touching its lowest in almost four months, adding to falls which are expected to put more downward pressure on global inflation.

'Dollar weakness a risk aversion story'

Despite the still-patchy economic news, many analysts still expect US Federal Reserve policymakers meeting this week to raise interest rates in September.

Expectations of a rate hike have slowly pushed up US Treasury yields and widened the dollar's premium over the euro. But the euro has also tended to rise when investors get more concerned about global growth and rein in riskier bets, as they were doing on Monday.

The common currency pared some of its early gains from a bullish Ifo survey of German business sentiment to stand up 1.2 per cent on the day at $US1.1112. A dollar index was down 0.80 percent, while the greenback was down 0.5 per cent versus the yen.

"Dollar weakness against the euro and the yen is a risk-aversion story reflecting China stocks," said currency strategist Richard Franulovich at Westpac in New York.

US Treasury prices got a lift from international investors seeking shelter from tumbling stocks. The 10-year note was last up 11/32 and yielding 2.2337 per cent.

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