Shanghai stocks lost 8.5% on Monday, its worst one-day loss since 2007.
The Shanghai Composite Index plunged 8.5 percent to 3,725.56 at the close, with 75 stocks dropping for each one that rose.
U.S. stocks were solidly lower in early afternoon trading Monday, following a steep sell-off in China and other global markets. Germany’s DAX and France’s CAC 40 were both about 2.5% lower, while the U.K.’s FTSE 100 was down 1.3%.
The S&P 500 Index fell by 12 points or 0.6% at 2,105.12 points with all 10 of its key sectors trading lower during the regular session.
The Chinese government has unveiled a slew of measures to prop up the market, including reducing the number of new shares to avoid a shares glut, a police crackdown on short-selling and a six-month ban on big shareholders selling stocks. Analysts have been skeptical that such gravity-defying efforts could be sustained.
In a statement Monday, a spokesman for China Securities Regulatory Commission said China Securities Finance Corp., a state-backed entity that offers margin financing and liquidity, has not taken away its backing for equities.
The dramatic 30 per cent slide in Chinese shares in June came after a sizzling yearlong rally took the market to multi-year highs even as the world’s second-biggest economy slowed. Companies also put off fresh IPOs and many suspended trading in order to prevent their share prices from falling further.
Monday’s sharp sell off follows a warning from a big U.S. hedge fund last week that risks in China are rising due to the massive losses and what impact it would have on the psyche of investors there. Chinese firms are major investors in the stock market.
The dollar was weak ahead of the week’s main set piece – Wednesday’s Federal Reserve policy decision and statement – with a better-than-expected survey of German business sentiment prodding the euro above $1.11 for the first time in two weeks.
He said the trigger was “a sluggish U.S. market amid stronger expectations of a Fed rate rise in the fourth quarter”. The gains were driven by commentary in state media that called the stock market undervalued.
US Treasury prices got a lift from worldwide investors seeking shelter from tumbling stocks. The Shenzhen Composite fell 7 percent and the small-cap ChiNext closed 7.4 percent lower. “Once those disappear, the market cannot support itself”. Global benchmark Brent crude was down 53 cents at $54.09 a barrel on the ICE future exchange in London. Meanwhile, the Indonesian rupiah continued to depreciate against the US dollar, making Indonesian assets unattractive to foreign investors.
In currency trading, the euro strengthened to $1.1071 from $1.0991 on Friday.