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Global economy woes spark share falls Global economy woes hit markets
(35 minutes later)
Shares and oil prices around the world have seen further falls, sparked by renewed fears over the health of the global economy.Shares and oil prices around the world have seen further falls, sparked by renewed fears over the health of the global economy.
In China, the authorities intervened again on the stock market to little effect. Shares in Shanghai fell 3.4%.In China, the authorities intervened again on the stock market to little effect. Shares in Shanghai fell 3.4%.
And expectations of a US interest rate rise dimmed after the Federal Reserve said the economy was not ready yet.And expectations of a US interest rate rise dimmed after the Federal Reserve said the economy was not ready yet.
On Wall Street, the Dow Jones index opened 1% lower, while markets in Paris and Frankfurt fell more than 2%.On Wall Street, the Dow Jones index opened 1% lower, while markets in Paris and Frankfurt fell more than 2%.
London's benchmark FTSE 100 index shed 0.56%, while the price of Brent crude oil was down 0.4% at $46.97 a barrel, although US crude recovered from earlier falls to stand 0.6% higher at $41.35.London's benchmark FTSE 100 index shed 0.56%, while the price of Brent crude oil was down 0.4% at $46.97 a barrel, although US crude recovered from earlier falls to stand 0.6% higher at $41.35.
Rate rise 'approaching' China fears
On Wednesday evening, the Fed released minutes from its meeting on 28-29 July, showing that one policymaker was ready to vote for an interest rate rise at the meeting. Markets have become increasingly nervous over prospects for the global economy, especially with signs that the Chinese economy is slowing.
Overall, the Fed thought conditions for a US rate rise "were approaching", but the economy was not ready yet. The devaluation of the yuan last week took many by surprise, and the Chinese stock market has continued to see big fluctuations despite efforts by Beijing to calm markets.
Other policymakers remained concerned that inflation would remain weak because of the strong dollar and falling commodity prices, which act as a double depressant on imports. On Thursday, Chinese shares fell again, with the benchmark Shanghai Composite index closing 3.4% lower at 3,664.29.
The Fed's key interest rate has been kept near zero since December 2008. On Wednesday, minutes from last month's meeting of the US Federal Reserve flagged up China as a potential problem, saying that a "material slowdown" in the Chinese economy could affect the US economic outlook.
There has been speculation that the Fed will raise rates at its meeting in September, and last month Fed chair Janet Yellen said she thought a rate rise this year was likely. The US central bank's meeting came before last week's action by China to weaken its currency.
China slowdown fears BBC economics editor Robert Peston has said many economists believe China's official 7% growth rate is a serious overstatement of the underlying reality.
The committee also cited China as a potential problem, saying that a "material slowdown" in the Chinese economy could affect the US economic outlook. He says even a fractional rise in US interest rates would be uncomfortable when the huge economies of China, Japan and the eurozone have been weakening.
The FOMC's meeting came before last week's action by China to weaken its currency. US rates
After days of volatility, Chinese equities traded lower once again on Thursday, despite Beijing's efforts to calm markets. The Federal Reserve's key interest rate has been kept near zero since December 2008, although there has been speculation that the Fed will raise rates at its meeting in September.
The mainland's benchmark Shanghai Composite closed 3.4% down at 3,664.29. The latest minutes from the Fed gave little direction as to whether a rate rise in September was on the cards.
The fall comes after the index saw strong volatility earlier in the week. They showed that most policymakers thought conditions for a US rate rise "were approaching", but the economy was not ready yet.
Traders appeared not to respond to efforts by the central bank to provide more liquidity to stabilise markets. There was also concern that inflation would remain weak because of the strong dollar and falling commodity prices, which act as a double depressant on imports.
BBC economics editor Robert Peston says many economists believe China's official 7% growth rate is a serious overstatement of the underlying reality. Although oil prices appeared to stabilise on Thursday, they had fallen sharply on Wednesday following the release of data showing that US oil stockpiles were higher than expected.
He says even a fractional rise in US rates would be uncomfortable when the huge economies of China, Japan and the eurozone have been weakening. The price of oil has more than halved over the past year, due to a combination of increased supplies and slowing demand.
Inflation focus The low oil prices are creating pressures on economies that are dependent on oil revenues.
In assessing the strength of the US economy, the Fed has been keeping an eye on the US jobs market - where the unemployment rate has been falling and is now 5.3%. However, inflation is still below the Fed's target of 2%. Among them is energy-rich Kazakhstan, the biggest economy of Central Asia, which has announced it is floating its currency, the Tenge.
The minutes from the Federal Open Market Committee's (FOMC) July meeting said: "Most judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point." As a result, the Tenge dropped by more than a third in one day.
The committee noted that the labour market "had continued to improve, with solid job gains and declining unemployment". Other emerging market currencies also came under pressure, with the Turkish lira briefly touching a record low of 3.0 to the US dollar.
However, when assessing inflation, it said that "some members continued to see downside risks to inflation from the possibility of further dollar appreciation and declines in commodity prices".