Shares slide on China slump and Treasuries

Fall in global equities boosts demand for dollar as investors rush for safety

European markets fell yesterday as investor confidence took a knock from last week’s spike in Treasury yields and from a Chinese market slump brought on by concern that an escalating trade war with the United States could curb China’s growth.

Chinese markets re-opened after a week’s holiday, and stocks recorded their biggest one-day drop since February, with the Shanghai-Shenzhen CSI300 down more than 4 per cent for only the second time in more than 2 1/2 years.

This helped set the tone for the European open and stock markets fell with the panEuropean index down 0.8 per cent and Germany’s DAX 0.8 per cent lower.

The MSCI world equity index, which tracks shares in 47 countries, fell 0.35 per cent.

The fall in global equities boosted demand for the dollar as investors rushed for safety. Against a basket of its rivals the US currency rose 0.3 per cent, edging towards a 14-month high hit in mid-August.

Investor fears of higher US interest rates, global protectionism, emerging market weakness and an Italian budget row have all combined to send equities sharply into the red in October, with world stocks down more than 2 per cent already.

The dark mood in China sent shivers across Asian markets and will add to investors nervousness — the MSCI benchmark emerging markets equity index dropped 0.8 per cent to its lowest level since May 2017 and is now down 5.5 per cent in October.

Guillermo Felices, a senior strategist at BNP Paribas Asset Management, calling the current concerns markets face a “powerful cocktail”. Renewed concerns over Italy’s budget also added to the riskoff tone in European equities.