China stock market plunge causes global losses

World stock markets plunged on Monday after China's main index sank 8.5 percent — its biggest drop since the early days of the global financial crisis — amid deepening fears over the health of the world's second-largest economy.

U.S. stock markets also fell, with the Dow Jones industrial average falling by more than 1,000 points at one point in early trading before rebounding a few hours later. The Dow closed the day down 585 points after day of massive swings.

Oil prices, commodities and the currencies of many developing countries also tumbled on concerns that a sharp slowdown in China might hurt economic growth around the globe. U.S. crude prices finished below $40 a barrel for the first time in six years Monday.

"The steep fall in commodities today is all down to bearish sentiment about China with the huge rout in its equities market," Daniel Ang, investment analyst at Phillip Futures in Singapore, told French news agency Agence France-Presse. "Investors are fearing further price drops in commodities and are channeling funds to safe havens including gold and the Japanese yen." 

The Shanghai index suffered its biggest percentage decline since February 2007, with many China-listed companies hitting their limit of a 10 percent fall. The benchmark closed at 3,209.91 points, meaning it has lost all of its gains for 2015, though it is still more than 40 percent above its level a year ago.

Underlying the gloom in China is the growing conviction that policymakers and regulators may lack the means to staunch the losses in that nation. The country is facing a slowdown in economic growth, the banking system is short of cash and investors are pulling money out of the country, experts note.

"There is a lot of fear in the markets," said Bernard Aw, market strategist at IG.

China's dimming outlook is drawing calls for more economic stimulus from Beijing, though earlier government efforts to stop the sell-off in stocks appear to have done little to stabilize markets.

Some analysts say they see opportunities for bargains in the latest plunge in prices. But underlying the gloom is the growing conviction that policymakers and regulators may lack the means to staunch the losses.

The panic has underscored the scale of the challenge for Chinese leaders in seeking to curb excess investment and to guide the economy toward a more sustainable pace of growth.

“My biggest concern is that global growth momentum is very fragile. The most important step is to see China take further action to try to bring their economy to a 7 percent growth path,” said Rajiv Biswas, Asia-Pacific chief economist for IHS.

Asia's gloom spread to European markets, where Britain's FTSE 100 closed down 4.7 percent, while Germany's DAX also closed down 4.7 percent and the CAC 40 of France closed down 5.4 percent. 

The market worries were spread across Asia, as Hong Kong's Hang Seng index fell 5.2 percent to 21,251.57. Australia's S&P ASX/200 slid 4.1 percent to 5,001.30, while South Korea's Kospi lost 2.5 percent to 1,829.81. Japan's Nikkei fell 4.6 percent to 18,540.68, its worst one-day drop since in over two and a half years.

Those declines followed tumbles over the weekend in others markets, including Egypt, Dubai and Saudi Arabia.

Wire services