Stocks slide as Shanghai leads drop

European markets and commodity prices dropped on Monday after China’s benchmark index tumbled by 8.5 per cent.

The Shanghai Composite Index notched up its biggest one-day loss since 2007 as government efforts to arrest a month-long rout crumbled.

Over 1,700 stocks fell by the maximum ten per cent, while only a few dozen rose, as the effects of a massive injection of state support wore off. Chinese stocks are now roughly 30 per cent down on their June peaks.

Beijing banned major shareholders from selling shares, encouraged brokers to buy stocks with a direct central bank liquidity channel, and halted trading on hundreds of companies.

However, there are concerns that the government may unwind support, with Bloomberg reporting that the International Monetary Fund has already told Beijing to roll back measures.

“Investors are afraid the Chinese government will withdraw supporting measures from the market,” Sam Chi Yung, a strategist at Delta Asia Securities Ltd, told the news provider. “Once those disappear, the market cannot support itself.”

Asian stocks were broadly lower, with the Nikkei in Japan shedding around one per cent and the Hang Seng in Hong Kong down three per cent, its biggest fall in three weeks.

The depressed mood saw European stocks open lower, with the DAX in Frankfurt falling more than one per cent and the FTSE 100 also down. The Euro Stoxx 50 slid 1.25 per cent.

Commodity prices continued to come under heavy pressure as fears about China’s appetite for raw materials mount.

Copper extended its run of losses to reach a fresh six-year low, while oil slid again as ongoing worries about over production dominate the market. US light crude hit $48 a barrel, not far off the six-year trough plumbed in March.

This extended a run of losses for commodities that last week saw the Bloomberg Commodity Index, which tracks 22 raw materials, slide to a 13-year low.

After plumbing a five-year low last week, gold rose on Monday as equities sank. The metal climbed above $1,100/oz as investors sought shelter. Silver prices rallied 1.5 per cent on the Comex in New York.