A weak open for US stocks; Chinese market

The Shanghai Composite tumbled 8.5% as PetroChina Co, long considered a target of state-linked market support funds, tumbled by a record 9.6%.

“Commodity prices are falling which is negative for China as an exporter and that’s impinging on other investors’ views on fundamental demand as China is also a big importer so the market grinds lower”, Beesley said. Germany’s DAX dropped 1.1 percent, France’s CAC 40 lost 1.2 percent and the U.K.’s FTSE 100 declined 0.2 percent.

The S&P 500 Index fell by 12 points or 0.6% at 2,105.12 points with all 10 of its key sectors trading lower during the regular session.

The slide prompted heavy selling in European stocks, with the Stoxx Europe 600 down 2.1% midafternoon, on track for its biggest daily percentage decline in a month.

Some analysts said the dive was sparked by brokerages restricting credit used to finance stock purchases, also known as margin trading. After aggressive intervention by the Chinese government to stop the bleeding, including suspending large market players from trading for six months, injecting new liquidity into the market, and slashing interest rates, the crisis seemed to subside. Analysts have been skeptical that such gravity-defying efforts could be sustained. “In addition, the recent economic data shows it still takes time for the economy to recover from its sluggishness”.

The Chinese government’s attempts to calm the country’s volatile stock markets appeared to have failed as stock prices on the Shanghai, Shenzhen and Hong Kong exchanges plummeted on Monday after a recent market rebound.

Investors were also cautious ahead of the Federal Reserve’s policy meeting later this week.

On the economics front, the U.S. Census Bureau reports June durable goods orders at 8:30 a.m. ET.

As well as blue-chip names such as Pfizer and Exxon Mobil, there are a range of social media stocks that have led the market so far in 2015 including Facebook, Cigna, Twitter and LinkedIn.

Faced with global declines in stock prices, investors moved into traditional safe havens. South Korea’s Kospi fell 0.4 per cent to close at 2,038.81. “Once those disappear, the market cannot support itself”.

“Dollar weakness against the euro and the yen is a risk-aversion story reflecting China stocks”, said currency strategist Richard Franulovich at Westpac in New York.

Brent crude fell $1.07 cents to $53.56 a barrel, touching its lowest in nearly four months, adding to falls which are expected to put more downward pressure on global inflation.

Beacon Roofing Supply was up 11.4 percent at US$33.52 after the company agreed to buy Roofing Supply Group in a deal valued at about US$1.1 billion.