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World markets were hit on Wednesday by a meltdown in Chinese markets, a slump in commodities and questions over whether Europe could save Greece.
European trading got off to a steady start, even though stocks had plunged 6.75% in China, where the country's regulator warned investors were being gripped by "panic sentiment".
That put all of Asia into a tailspin. Hong Kong dropped 8%, and Japan's Nikkei and stocks in Australia took heavy blows, leaving investors only the yen and safe-haven government bonds for refuge. The yen rose to a six-week high against the dollar.
The wave of global uncertainty also left traders wondering whether Federal Reserve meeting minutes due later, normally a market mover, would provide much value considering the real-time risks.
Beijing has taken a series of steps to stabilise its turbulent markets in recent weeks, but with little success so far. Nick Lawson, a managing director at Deutsche Bank in London, said the authorities now had two choices.
"1) let the unwind run its natural course and deal with the fallout or 2) manipulate the market but run the risk that this will entail so many impediments to free trade that index providers and foreign investors will be discouraged from entering the market for a long time."
For once, it left the euro zone's long-running Greek drama as a side show.
Euro zone leaders on Tuesday gave Athens until the end of the week to come up with proposals for reforms in return for loans. Without the aid, Greece is likely to crash out of Europe's single currency.
One of the European Central Bank's top policymakers, Christian Noyer, said without a deal the ECB would pull the emergency funding that is now keeping Greece's banks alive.
"Our rules oblige us to stop immediately at the point when there is no prospect of a political accord on a programme, or at the point when the Greek banking system crumbles - which would happen if it enters generalised default on all its debts," he said.
But European investors managed to stay hopeful that a deal was still possible. The pan-regional FTSEurofirst 300 snapped a four-day losing streak, led by Italian and bank stocks.
The euro also climbed back to $1.1035 and southern euro zone government bonds made ground as risk appetite tentatively recovered.
DELICATE CHINA
Commodity markets were another victim of China's turmoil.
Oil prices fell again, in what is shaping up as their biggest weekly slump since March. Copper in London and Shanghai dropped to six-year lows and gold slid to a four-month trough.
"A perfect storm of events has hit oil markets," Morgan Stanley said.
The drop in China extended a plunge that has slashed Chinese shares 30% since mid-June, threatening the country's already-slowing economy despite a slew of measures to support the market.
Over 500 China-listed companies announced trading halts on the Shanghai and Shenzhen Exchange on Wednesday, taking total suspensions to about 1,300 - 45% of the market.
"I've never seen this kind of slump before. I don't think anyone has. Liquidity is totally depleted," said Du Changchun, an analyst at Northeast Securities.
"Originally, many wanted to hold blue chips. But since so many small caps are suspended from trading, the only way to reduce risk exposure is to sell blue chips."
The Australian dollar, often used as a liquid proxy for China plays, slumped to a six-year low against the U.S. dollar of $0.7389.
The yield on the 10-year US Treasury note last stood at 2.210%, below its US close of 2.231% on Tuesday, when it dropped to a five-week low of 2.185%.
