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Plunge in Chinese shares helps send global markets lower

Ken Sweet Associated Press

NEW YORK – The worst drop in China’s stock market in eight years helped drag down other markets around the world Monday.

Faced with a drop in stock prices in Asia, Europe and the U.S., investors moved into traditional safe havens. The yield on the 10-year U.S. Treasury note fell to 2.22 percent from 2.26 percent on Friday. The price of gold rose 1 percent.

Dividend-heavy stocks, like utilities, also gained. Investors favor high-dividend companies during times of volatility because they provide a reliable income stream.

“There remain very few buyers out there and there are some growing concerns that we’re looking at a slowdown in global economic growth,” said Sean Lynch, co-head of global equity strategy with the Wells Fargo Investment Institute.

The worries for investors this week started with an 8.5 percentage point plunge on the Shanghai market, the biggest one-day decline since February 2007. It was the latest big drop in the Chinese stock market, which has slumped since early June.

The Chinese sell-off ruffled other markets in Asia, though the scant amount of foreign investment in Chinese shares limits the ripple effects outside of Hong Kong, a semiautonomous Chinese territory that is also a financial center.

Hong Kong’s Hang Seng shed 3.1 percent and Japan’s Nikkei 225 dropped 1 percent. South Korea’s Kospi fell 0.4 percent.

Europe, which has already had a volatile summer because of worries about Greece’s precarious finances, also fell broadly on Monday.

The Euro STOXX 50 index, the European equivalent of the Dow 30, fell 2.4 percent. Germany’s DAX lost 2.6 percent, France’s CAC-40 lost 2.6 percent and the U.K.’s FTSE 100 lost 1.1 percent.

The price of oil fell to the lowest point since March as the steep drop in Chinese stocks caused concerns that demand from the world’s second biggest oil consumer would slip. Benchmark U.S. crude fell 75 cents to close at $47.39 a barrel in New York. Brent crude, a benchmark for international oils used by many U.S. refineries, fell $1.15 to close at $53.47 a barrel in London.