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The dollar index, which measures its performance against a basket of six major currencies, fell 0.9pc to its lowest in two months.

Concerns about a China-led global economic slowdown and tumbling commodities prices had U.S. traders fearing the worst after a 5 percent decline in the both the S&P and Dow last Thursday and Friday.

The minutes to the July 28-29 meeting of the policy-setting Federal Open Market Committee, released last week, showed both a caution over still-low inflation and a concern over China’s economic malaise.

U.S. consumer prices rose slightly in July, but a solid increase in the cost of shelter suggested inflation was probably stabilizing enough to support expectations the Federal Reserve will raise interest rates this year.

By increasing demand for them, the government hopes prices will rise. As the slide highlighted on Monday, those efforts have not been a success.

Anxiety has been growing over the global economy amid lower commodities prices, plunging emerging-market assets and a selloff in both stocks and bonds sold by lower-rated U.S. companies, known as junk bonds.

Inflation slowed in July after sharp increases the previous two months, the government said in a report that stopped short of giving the Federal Reserve the evidence it has been seeking to raise interest rates. Food inflation continued to rise across the board (up 0.2 percent)...

As the selling accelerated, some benchmark indexes were at or near 10 per cent below their recent peaks – a “correction” in Wall Street parlance.

Economists interviewed by Reuters said the first interest rate hike in nearly a decade by the Federal Reserve remains possible despite the soft inflation figures since other indicators point to a strengthening economy such us an improving housing sector and tightening labor market.

Oil has dropped below $40 a barrel for the first time since the end of the global economic crisis.

The Labor Department said its consumer price index edged up by 0.1 percent in July after climbing by 0.3 percent in June and 0.4 percent in May.

“If you look at the interest rate probability according to the Fed fund futures, on August 13 it was showing 50 percent for September and now it’s down to 32 per cent”.

A “correction” is a Wall Street term for when an index like the Dow industrials or the Nasdaq – or an individual stock – falls 10 percent from its most-recent high. Crude oil briefly dipped below $40 a barrel for the first time since March of 2009.

Manufacturing unit manufacturing on the earth’s second-largest financial system shrank at its quickest price this month in greater than six years, fueling considerations that China’s sudden slowing could have far-reaching results across the globe. The new bout of...

Officials of the U.S. Federal Reserve are watching inflation and the U.S. job market closely as they decide when and how quickly to raise interest rates.