Big Wall St slide on more China fears

Specialist Meric Greenbaum works at his post on the floor of the New York Stock Exchange. File photo / AP

Wall Street followed the slide of equities in Europe and Asia overnight, amid mounting concern that the slowing pace of growth in China will curb the global economy.

A report showed a contraction in Chinese manufacturing, with the nation's official manufacturing purchasing-managers index falling to 49.7 in August, down from 50 in July.

"It's general risk aversion manifesting itself after a really bad August," Mohannad Aama, managing director, Beam Capital Management in New York, told Reuters. "The continued uncertainty about China is definitely adding to worries."

That uncertainty seems to rub off in the US. The Institute for Supply Management's national factory activity index fell to 51.1 in August, the lowest reading since May 2013, from 52.7 in July.

"It suggests that the recent eruption in uncertainty towards Chinese and global growth is beginning to affect US business decisions," Millan Mulraine, deputy chief economist at TD Securities in New York, told Reuters. "We look for the Fed to take a pass on raising rates this month as they continue to assess the incoming economic data for any evidence of fallout."

On Saturday, US Federal Reserve Vice Chair Stanley Fischer left the door open for a rate hike this month though he said more data would be assessed.

At about 4pm in New York, the Dow Jones Industrial Average sank 2.8 percent, the Standard & Poor's 500 Index dropped 3.4 percent, and the Nasdaq Composite Index slid 3.3 percent.

Declines in shares of Exxon Mobil and those of JPMorgan Chase, last down 4.5 percent and 4.6 percent respectively, led the drop in the Dow. All 30 stocks in the Dow traded lower.

"The problem is, as much as China is the catalyst for this, it's also that we're seeing weakness in fundamentals here," Matt Maley, an equity strategist at Miller Tabak & Co in New York, told Bloomberg. "A lot of company earnings were hurt by China in the second quarter and it's only gotten worse. People are losing confidence with the whole situation there breaking down, not just in the stock market but in data as well."

International Monetary Fund Managing Director Christine Lagarde said the outlook for global growth was" likely weaker than we anticipated last July."

"This reflects two forces: a weaker than expected recovery in advanced economies, and a further slowdown in emerging economies, especially in Latin America," Lagarde said in a speech in Jakarta.

"Asia as a region is still expected to lead global growth," Lagarde noted. "But even here, the pace is turning out slower than expected-with the risk that it may slow even further given the recent spike in global risk aversion and financial market volatility."
In Europe, the Stoxx 600 Index finished the session with a 2.7 percent slide from the previous close.

Germany's DAX Index fell 2.4 percent, as did France's CAC 40 Index, while the UK's FTSE 100 Index declined 3 percent, paced by global miners