China slowdown

Stock markets have reacted with alarm to new figures that point to a hard landing ahead for the Chinese economy.

An official monthly index of Chinese manufacturing released Tuesday reached a three-year low in another sign of slower-than expected growth, as China is hit by soft demand, overcapacity and falling investment. The survey of factory purchasing managers fell to 49.7 in August from 50.0 in July, indicating a contraction.

Even more worrying, China's services sector, which has been one of the bright spots as the economy slowed, also showed signs of cooling, a similar business survey said.

Europe's stock markets sank on Tuesday, dragged down by fears about the Chinese economy. Frankfurt's DAX 30 fell by 1.81 percent to 10,073.74 after the opening bell and was down 2.4 percent by close. London's FTSE 100 index plunged 3 percent and the CAC 40 in Paris also dropped 2.4 percent.

The European markets followed the lead of Asian traders. China's Shanghai Composite Index dropped 1.2 percent to 3,166.62 after dipping nearly 5 percent earlier in the session. Japan's Nikkei 225 was also volatile, dropping 3.8 percent to 18,165.69. The Hang Seng in Hong Kong lost 2.2 percent to 21,185.43. South Korea's Kospi slid 1.4 percent to 1,914.23.

Australia's S&P/ASX 200 fell 2.1 percent to 5,097.40 and shares in Southeast Asia were also lower.

The falling share prices and a yuan devaluation have also taken their toll on the Chinese economy. Many analysts believe Beijing will fall far short of its 7-percent growth target for this year.

sgb/hg (AFP, Reuters, AP)