In addition, 480 stocks hit 52-week lows on the New York Stock Exchange, the most in one day since October 15. But crude oil is still under pressure on oversupply concerns, and fell to as low as $47.45, a drop of more than 1%.
Wall Street has been weighed in part by concerns that a high U.S. dollar and sluggish global demand was pressuring corporate profits, a theme that should wend its way through this week’s busy diary of earnings. Monday’s decline marks the fifth straight day of losses for both the S&P and the Dow.
The benchmark Shanghai Composite Index plunged 8.48 percent to close at 3,725.56 points, in the sharpest daily drop since February 27, 2007.
Margin trading has been under scrutiny, with brokerages limiting the credit available for financing the purchase of stocks. Chinese authorities took aggressive steps to stabilise the market after it tumbled last month. Analysts have been skeptical that such gravity-defying efforts could be sustained.
Scott Wren, senior global markets strategist at Wells Fargo Investment Institute said it’s a mistake to just hold China stocks by themselves, given the volatility.
Chinese shares fell dramatically in June after a sizzling yearlong rally took the market to unsustainable heights.
Officials allowed more than 1,400 companies to halt trading, banned major shareholders from selling stakes and armed a state- run financing vehicle with more than $480 billion to support the market. The gains were originally driven by commentary in state media that called the stock market undervalued.
US Treasury prices got a lift from global investors seeking shelter from tumbling stocks. Chinese firms are major investors in the stock market.
China’s stock market began to crumble in late June and early July.
The Hong Kong Hang Seng Index declined 3.28 per cent to trade at 24,305.23.
The Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, increased 0.9 percent last month after an unrevized 0.4 percent drop in May. In South Africa, the rand plummeted to a record low of 12.68 to the dollar on Friday despite moves by the central bank to defend the currency. On Monday, the price of gold bounced back from a five-year low but other metal prices lost more ground.
The figures indicate that the Chinese economy, the world’s second largest, is heading for a slowdown, the dealers said. “Once those disappear, the market can not support itself”.
The Fed is not expected to make any changes to monetary policy when it concludes a two-day meeting on Wednesday, although markets are anticipating a rate hike at the September meeting.