China slowdown worries hit world stocks, commodities

Fears over Chinese demand hits miners' shares

Concern about a slowdown in China hammered stocks and commodities on Monday while signs of differences between major economic powers on the need to stimulate growth further clouded the outlook.

Asian shares fell as investors worried a key measure of Chinese manufacturing, due on Tuesday, could indicate activity was contracting.

The slide was carried over into Europe, where fears over Chinese demand hit miners' shares. A further profit warning from British supermarket Tesco, whose shares fell 8%, also took its toll.

The dollar, which last week racked up its 10th consecutive week of gains against a basket of currencies, its longest winning streak since the US currency's free float in 1973, gave up ground against major rivals.

The euro traded 0.2% higher at $1.2860, after touching a 14-month trough of $1.2826 in Asian trade, while the yen was almost flat at 109.04 to the dollar.

Adding to the sense of gloom in markets, Group of 20 finance ministers and central bank chiefs meeting in Australia at the weekend said they were close to adding $2 trillion to the global economy, though there were signs of disagreement.

US Treasury Secretary Jack Lew cited "philosophical" differences with some of his European counterparts over the need for short-term stimulus.

German Finance Minister Wolfgang Schaeuble stressed the need for structural reform and strict budget controls.

European Central Bank President Mario Draghi will speak in the European Parliament on Monday, days after a lukewarm take-up of cheap loans under the bank's latest scheme to push more money into the euro zone financial system.

The G20 finance leaders also warned of the potential for a build-up of excessive risk in financial markets in an environment of low interest rates and low asset price volatility.

PULSE

Investors will be able to take the pulse of the global economy on Tuesday when flash purchasing managers data on manufacturing and service sector activity is released.

"The psychological effect of a below-50 reading will be significant and consistent with the slew of softer Chinese data over recent weeks." Mitul Kotecha, head of FX strategy Asia-Pacific for Barclays in Singapore, said in a note to clients.

However, the focus will be on the Chinese manufacturing index, which some analysts see falling below the 50 level that divides expansion from contraction.

The pan-European FTSEurofirst stock index was down 0.3% at 1,395.45 points.

"Tesco has dealt investors a severe blow to confidence, with fellow food retailers also suffering," said Keith Bowman, equity analyst at Hargreaves Lansdown.

"Concerns regarding China, comments from the finance minister and whether additional economic stimulus will be applied also appears to be hitting investor sentiment."

MSCI's broadest index of Asia-Pacific shares outside Japan dropped about 1.1%. Japan's Nikkei stock average ended down 0.7%, after it marked its highest closing level since 2007 on Friday and gained 2.3% last week.

On Friday, Wall Street ended broadly flat, despite the Dow Jones industrial average edging up to a second straight record, after a strong debut by Chinese internet company Alibaba was offset by falling technology stocks.

Chinese steel and iron ore futures hit record lows, down 4%, plagued by excessive supply and demand worries.

Brent crude oil fell below $98 a barrel, hit by similar factors. Three-month copper on the London Metal Exchange was down 1.4% at $6,741 a tonne.