Commodities, China shares lick wounds after brutal July

Brutal sell-off revives fears about global economy

Commodities and China investors waved a relieved goodbye to July on Friday following a brutal sell-off that has revived fears about the global economy and overshadowed more encouraging news from the US and Europe.

There were signs that the rout wasn't over yet as Chinese stocks - which have suffered their worst monthly drop in 6 years - wobbled again, oil prices slipped following a more than 15% July slump and metals from industrial copper to precious gold hit multi-year lows.

That happened despite a pause in the dollar's recent rise, which has been compounding the commodity pressure as signs build that the US Federal Reserve is heading for its first rate hike in almost a decade.

European markets, relieved that Greece looks to be staying in the euro after its last-minute deal this month, saw a solid start to the day to cap a more than 4% monthly rise for stocks and the biggest drop in Italian bond yields in two years.

"The main moves this week have been the continued broad-based weakness in commodities," said Societe Generale strategist Alvin Tan. "Essentially they have been on the downtrend for a month and of course we have been on a roller coaster ride in China equities and that has affected sentiment."

European stocks were underpinned by some upbeat company earnings. Shares in UCB surged 5.2% after the Belgian pharmaceutical company raised its 2015 forecasts and bank BNP Paribas gained 3.5% after its Q2 revenue rose nearly 16%.

Economists were waiting for July euro zone inflation and unemployment data due at 0900 GMT and for in-depth US wage data due later. But just as important remained commodities and China.

Copper, considered a bellwether for global economic activity, was facing a 9% monthly loss as it stumbled to $5,238 an tonne. Gold was down over 7% on the month at $1,081.95 an ounce as it chalked up its longest run of week-on-week falls in 16 years. 

FRAGILE CHINA

China's CSI300 index ended flat after a late dip to leave it down 14.7% on the month, and the Shanghai Composite Index lost 1%, extending its July losses to 13.4% despite recent support measures by the country's authorities.

China's securities regulator said on Friday it was investigating the impact of automated trading on the market and has clamped down on 24 trading accounts found to have abnormal bids for shares or bid cancellations.

Crude oil also slipped for a second session as concern over global oversupply intensified after the head of the OPEC oil exporters' cartel indicated there would be no cutback in production. US crude was down 0.3% at $48.2 a barrel.

Lead by China's woes, emerging stocks looked on track to finish their third straight month in the red, with many near multi-year lows as the sector grappled with the prospect of US rate rises and sluggish growth data at home.

US gross domestic product data released on Thursday showed growth accelerated in the second quarter, though slightly short of some forecasts. Growth was tweaked higher in the first quarter, backing the Fed's assessment at its meeting this week that the economy was expanding "moderately."

"We believe there's enough here for the Fed to raise interest rates for the first time in nine years," said Kathy Lien, managing director at BK Asset Management in New York.

The dollar inched down about 0.1% on the day to 124.030 yen, after rising as high as 124.58 overnight, its highest level since June 10.

The euro edged about 0.1% higher to $1.0938, after dropping to a one-week low of $1.0835 on Thursday.