Alarm bells rang across world markets on Monday as a near 9 percent dive in China shares and a sharp drop in the dollar and major commodities panicked investors.
European stocks were more than 5 percent in the red and Wall Street was braced for similar losses after Asian shares slumped to 3-year lows as a three month-long rout in Chinese equities threatened to get out of hand.
Oil plunged another 4 percent, while safe-haven government U.S. an German bonds and the yen and the euro rallied as widespread fears of a China-led global economic slowdown and currency war kicked in.
“It is a China driven macro panic,” said Didier Duret, chief investment officer at ABN Amro. “Volatility will persist until we see better data there or strong policy action through forceful monetary easing.”
With serious doubts also now emerging about the likelihood of a U.S. interest rate rise this year, the dollar slid against other major currencies.
The near 9 percent slump in Chinese stocks was their worst performance since the depths of the global financial crisis in 2007 and wiped out what was left of the 2015 gains, which in June has been more than 50 percent.
With the latest slide rooted in disappointment that Beijing did not announce expected policy support over the weekend, all index futures contracts slumped by their 10 percent daily limit, pointing to more bad days ahead.