China worries drive US stocks down nearly 3%, fuel sharp selloffs in Europe

A trader works on the floor of the New York Stock Exchange on Tuesday.
A trader works on the floor of the New York Stock Exchange on Tuesday. PHOTO: REUTERS

NEW YORK (AFP/REUTERS) - US stocks lost another nearly three per cent Tuesday as new data offered more evidence that China's industrial machine is stalling.

Losses were especially heavy in shares of banks and oil companies, but the selloff also extended to tech giants like Amazon and Apple.

The Dow Jones Industrial Average finished down 469.68 points (2.84 per cent) at 16,058.35.

The broader S&P 500 plunged 58.33 points (2.96 per cent) to 1,913.85, and the Nasdaq Composite gave up 140.40 (2.94 per cent) at 4,636.10.

Wall Street followed sharp selloffs in Asia and Europe, after China's official purchasing managers' index fell to its lowest level in three years in August, suggesting the manufacturing sector was contracting.

In Indonesia, International Monetary Fund head Christine Lagarde indicated that the institution was likely to again cut its estimate for world growth this year, after trimming it to 3.3 per cent just two months ago.

"The market is in a situation where it can only see reasons to fall. We are adapting to a world where economic growth is going to be slower than believed in recent months, because of the hit from China and the emerging economies," said Gregori Volokhine of Meeschaert Financial Services.

Citigroup and Bank of America led a big fall in banking shares, both sinking about 4.7 per cent.

Dow members ExxonMobil lost 4.2 percent and Chevron 3.5 per cent as oil prices buckled again under the Chinese data.

Large tech shares also tumbled hard: Apple lost 4.3 per cent, Google 3.3 per cent and Amazon 3.2 percent.

A solid August for US car sales did not help automakers either: GM lost 2.7 per cent and Ford 1.1 per cent.

Bond prices were mixed. The yield on the 10-year US Treasury slipped to 2.17 per cent from 2.20 percent Monday while the 30-year was flat at 2.93 per cent. Bond prices and yields move inversely.

European equities also fell sharply on Tuesday, with miners slumping after the weak manufacturing data from China renewed concerns for the economic health of the world's biggest metals consuming country.

The FTSEurofirst 300 index of top European shares ended 2.8 per cent lower at 1,392.57 points, with basic resources stocks plummeting 5.6 per cent, making them the top sectoral losers.

"Sentiment is very fragile. We are seeing a confirmation of the slowdown in China," Lorne Baring, managing director of B Capital Wealth Management, said.

"European stocks could get even cheaper in this period of volatility but longer term, they look like good value and dividend yields are attractive. We are advising our clients to remain invested in high quality European stocks."

Miner and commodity trader Glencore was down nearly 10 per cent, the biggest faller in the FTSEurofirst 300 index, while diversified miners BHP Billiton, Anglo American and Rio Tinto fell 5.0 to 7.6 per cent. Investor fears over Chinese growth contributed to a drop in European shares in August, with the FTSEurofirst 300 recording its biggest monthly loss in four years on Monday.

"The PMI was below 50, which is a psychologically important level and puts into real focus the fact that China is contracting," ETX Capital senior sales trader, Joe Rundle, said. "With the weak data coming out, we're going to see the negative sentiment from the last few weeks continuing."

Germany's DAX, which has substantial exposure to China, fell 2.4 per cent despite data showing factory activity at a 16-month high and the jobless rate at a record low.

In aggregate, euro zone manufacturing growth eased last month, with Italian and French factory PMIs falling.

Among individual fallers, shares in British hedge fund manager Man Group fell 6.8 per

cent after a report that the head of its China unit had been detained as part of an inquiry into recent Chinese market volatility.

Bucking the trend, Sweden's Elekta jumped 7.9 per cent after reporting first quarter earnings, making it the biggest riser on the STOXX Europe 600. Traders cited an upbeat sales forecast as supporting the health care firm.