Markets down as China stocks sink 6%

Chinese stocks tumbled by the most in three weeks on Tuesday (August 18th) as investors bet the government would do less to prop up equities.

The Shanghai Composite Index shed more than six per cent, with more than 600 companies dropping by the daily limit of ten per cent.

A report on Tuesday showed house price gains spreading, which cooled expectations for more stimulus measures from Beijing to support markets.

Chinese markets have suffered significant volatility in recent months and last week the country’s central bank devalued the currency amid concerns about a slowdown in the world’s second-largest economy.

Stocks in Shanghai had rallied by nearly six per cent last week despite the yuan’s biggest fall in more than 20 years.

Equities across Asia were lower and European markets were lacklustre on Tuesday morning.

The Nikkei in Japan lost 0.3 per cent and the Hang Seng in Hong Kong dropped by 1.3 per cent.

In London, the FTSE 100 was down 0.4 per cent at 6,525, while the DAX in Frankfurt was barely changed at 10,944.

The mood continues to depress key commodity prices. US crude futures shed 0.6 per cent to trade near $42 a barrel, while copper dipped nearly two per cent at one stage to plumb a fresh six-year trough.

On the Comex division of the New York Mercantile Exchange, copper for September delivery sank to $2.281 a pound, its lowest since July 2009, before recovering slightly to $2.290.

Worries about China, which consumes 40 per cent of global copper output, are particularly significant for the metal.

Meanwhile, sterling surged 0.5 per cent against the dollar to its highest in more than six weeks, after figures showed UK inflation ticked up in July. GBP/USD advanced to 1.5667 as the data boosted the case for the Bank of England to hike rates.

The pound was also up sharply against the euro, with EUR/GBP down 0.6 per cent at just above 70p, while the single currency was down slightly against the dollar at 1.1067.

The dollar index was barely changed, while Malaysia’s ringgit slipped 0.3 per cent against the greenback to a fresh 17-year low. Thailand’s baht dropped close to its lowest level in six years after a fatal bomb blast in Bangkok on Monday.