China stocks rout stings global markets

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

Wall Street ended down on the worries over China’s slowing growth, crystallized by a stunning 8.5 percent fall in Shanghai shares that also rattled equity markets in Europe and Asia.

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

“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.

Wall Street’s Dow Jones industrial average finished down 127.94 points, or 0.73 percent, to 17,440.59, the S&P 500 ended down 12.01 points, or 0.58 percent, to 2,067.64 and the Nasdaq Composite lost 48.85 points, or 0.96 percent, to 5,039.78.

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

Shares of Teva Pharmaceutical jumped 16.41 percent to a record high of $72 after it agreed to buy Allergan’s generic drugs business for $40.5 billion, giving up on its bid to buy Mylan. Allergan rose 6.09 percent while Mylan fell 14.51 percent.

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

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 1.4 percent on Monday.

Oil hit four-month lows after the Chinese stock crash fueled worries the world’s biggest energy consumer may cut back and as more evidence emerged of a global crude supply glut. Brent crude oil settled down $1.15, or two percent, at $53.47 a barrel. In post-settlement, it fell to as low as $52.90, its lowest since mid-March.

Despite the still-patchy economic news, many analysts 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 did on Monday.