Global economy woes hit markets

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%.
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%.

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.

China fears

Markets have become increasingly nervous over prospects for the global economy, especially with signs that the Chinese economy is slowing.

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.

On Thursday, Chinese shares fell again, with the benchmark Shanghai Composite index closing 3.4% lower at 3,664.29.

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.

The US central bank's meeting came before last week's action by China to weaken its currency.
BBC economics editor Robert Peston has said many economists believe China's official 7% growth rate is a serious overstatement of the underlying reality.

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.

US rates

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 latest minutes from the Fed gave little direction as to whether a rate rise in September was on the cards.

They showed that most policymakers thought conditions for a US rate rise "were approaching", but the economy was not ready yet.

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.

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.
The price of oil has more than halved over the past year, due to a combination of increased supplies and slowing demand.

The low oil prices are creating pressures on economies that are dependent on oil revenues.

Among them is energy-rich Kazakhstan, the biggest economy of Central Asia, which has announced it is floating its currency, the Tenge.

As a result, the Tenge dropped by more than a third in one day.

Other emerging market currencies also came under pressure, with the Turkish lira briefly touching a record low of 3.0 to the US dollar.