European shares slide on 'powerful cocktail' of China slump, Treasuries and Italy

LONDON (Reuters) – European markets fell heavily on Monday as a sales force in the US and Europe.

Chinese stocks returned from a week's holiday to record their biggest one-day drop since February, with the Shanghai-Shenzhen CSI300 down more than 4 percent for only 2-1 / 2 years. [L4N1WO13F]

This download has been successfully translated from French. 0.7 percent and Germany's DAX 0.8 percent lower.

The MSCI world equity index, which tracks shares in 47 countries, fell 0.34 percent.

The fall in global equities boosted demand for the dollar as investors rushed for safety. Against a basket of its rivals the greenback rose 0.3 percent, edging toward a 14-month high hit in mid-August.

Investor fears of higher U.S. interest rates, global protectionism, emerging market weaknesses and an Italian budget row have all combined to send dividends into the red in October, with world stocks down more than 2 percent already.

MSCI's benchmark emerging markets index dropped 0.7 percent to its lowest level since May 2017, and is now down 22 percent from January's peaks.

Growth concerns the People 's Bank of China (PBOC) on the face of the crisis as it' s going to hit the backdrop of the United States.

"China is cutting rates and increased monetary policy, which is a response to the fact that China's economy is slowing down but the market is not enough stimulus to cut the slowdown," said Guillermo Felices, a senior strategist at BNP Paribas Asset Management, calling the current concerns markets a "powerful cocktail".

"They've injected more liquidity into the market to contain the slowdown, which has been translated into weaker equity prices."

The Chinese slide comes after U.S. Treasury yields hit seven-year highs on the strength of the inflationary pressures and inflationary pressures – adding to the reasons for the US Federal Reserve to continue with its hiking cycle.

U.S. trading is likely to be muted on Monday, with closed markets for Columbus Day.

ITALY UNDER PRESSURE

Renewed concerns over Italy's budget also added to the risk-off tone in European equities. The FTSE MIB skidded 2.2 percent to its lowest since 21 April 2017, new highs, putting on bank shares.

The European Commission has told Italy it is concerned about its budget deficit plans for the next three years since they breached the EU, but insisted on Saturday it would be "not retreat" from its spending plans.

Italy's 10-year government bond hit fresh oven and a half year highs on Monday. As a result the euro fell 0.4 percent to $ 1.1480, close to its lowest since Aug, 20.

"We are a bit surprised by the strength of the reaction in bond markets, but it appears the European Commission will take a tough stance when Italy submits its budget," said Mizuho rates strategist Antoine Bouvet.

Germany's 10-year government bond, the benchmark for the region, remains close to four-month highs at 0.559 percent.

Oil dropped back to $ 83.27 per barrel after Washington said it may grant waivers to sanctions against Iran's oil exports next month, and as Saudi Arabia was said to be replacing any potential shortfall from Iran.