(News Bulletin 247) – Wall Street fell quite sharply on Tuesday, penalized like the European stock markets by renewed concern about the state of health of the Chinese economy.

At the end of the morning, the Dow Jones fell 0.8% to 35,036.1 points, while the Nasdaq Composite dropped more than 0.8% to 13,675 points.

US equity markets are showing heaviness in the wake of Chinese indicators that have fueled fears of a slowdown in the global economy.

The latest in a series of disappointing economic statistics, Chinese industrial production saw its growth decelerate to +3.7% year on year in July, while retail sales, up just 2.5%, also came out below consensus.

Investors also learned that the Chinese central bank decided to cut the interest rate on its medium-term credit facility for the second time in three months to stimulate activity.

These new fears about the Chinese economy particularly affect stocks linked to raw materials (-1.7%), which are very dependent on the development of activity in the world’s second largest economy.

On the NYMEX, oil prices are falling sharply against a backdrop of fears about the Chinese economy, which logically weighs on energy stocks (-2%).

A sign of market jitters, the CBOE’s VIX volatility index – often dubbed the ‘fear index’ – soared 9% beyond 16 points.

Today’s US indicators did nothing to cheer up market participants.

Retail sales, however, rose 0.7% sequentially in July, beating the consensus that was aiming for an increase of 0.4%, after rising 0.3% the previous month.

On the debt front, Treasuries saw their yields reach new 16-year highs this morning, before playing their safe haven role following the bad news from China.

The yield on 10-year paper thus returned to around 4.17% after reaching a peak of 4.27% since the summer of 2007.

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