US stocks open lower, continuing a losing streak; Shanghai's index dives 8 percent

Stocks were solidly lower in early trading Monday, following a steep sell-off in China and other global markets.

The Dow Jones industrial average lost 147 points, or 0.8 percent, to 17,420 as of 10:04 a.m. Eastern time. The Standard & Poor's 500 index lost 13 points, or 0.6 percent, to 2,066 and the Nasdaq composite lost 40 points, or 0.8 percent, to 5,047.

The main focus for investors was the precipitous 8.5 percentage point fall on the Shanghai market overnight, which was the biggest one-day decline since February 2007. It was the latest big drop in the Chinese stock market, which has been falling since early June.

Some analysts said the dive was set off by brokerages restricting credit used to finance stock purchases, also known as margin trading. Chinese authorities took aggressive steps to stabilize the market after it tumbled last month, wiping away about $3.2 trillion in market value. Analysts have been skeptical that such gravity-defying efforts could be sustained.

"The continuous check on margin trading by security companies has triggered today's sell-off," said Xu Xiaoyu, a market strategist at China Investment Securities. "In addition, the recent economic data shows it still takes time for the economy to recover from its sluggishness."

The Shanghai benchmark had risen about 150 percent by the time it peaked in early June. The gains were originally fired by commentary in state media that called the stock market undervalued. That led investors to believe the government would ensure that stock prices gained. Many small investors jumped into the market near its peak and are now sitting on significant losses.

The Chinese sell-off ruffled other markets in Asia, though the scant amount of foreign investment in Chinese shares limits the ripple effects outside of Hong Kong, a semiautonomous Chinese territory that is also a financial center.

Hong Kong's Hang Seng shed 3.1 percent and Japan's Nikkei 225 dropped 1 percent. South Korea's Kospi fell 0.4 percent.

In Europe, there were also broad losses. Germany's DAX lost 2.3 percent, France's CAC-40 lost 2.2 percent and the U.K.'s FTSE 100 lost 1.1 percent.

Elsewhere, traders were turning their minds toward the U.S. Federal Reserve as they try to assess when the central bank will start raising interest rates. The market appears split between those who think it will happen in September or December. The central bank will meet this week as well, but it is unlikely to begin raising rates.

Traders also have the busiest week for second-quarter earnings reports this week, with 174 members of the S&P 500 as well as six members of the Dow average reporting their results.

In energy markets, benchmark U.S. crude was down 65 cents at $47.48 a barrel in New York. Brent crude, which is used to price international oils, was down $1.15 at $53.45 a barrel on the ICE future exchange in London.

In currency trading, the euro strengthened 0.9 percent to $1.1065 while the dollar fell 0.5 percent to 123.19 yen.

U.S. government bond prices rose. The yield on the 10-year Treasury note fell to 2.22 percent from 2.26 percent late Friday.


AP Business Writer Youkyung Lee contributed from Seoul, South Korea and researcher Yu Bing contributed from Beijing.