* Investors cut riskier assets after China share slide
* Pan-European shares retreat 0.8 percent
* Dollar, yen advance
By Emelia Sithole-Matarise
LONDON, Aug 19 (Reuters) - European and Asian stocks fell on
Wednesday while government bonds and the dollar firmed on the
back of a slump for Chinese shares and investors' concerns over
the sustainability of the global economic recovery.
The Shanghai composite index <> slid 4 percent to a
two-month closing low on disappointment that authorities were
not taking steps to support the market amid increasingly heavy
losses, rattling global markets.
The dollar index, which tracks the performance of the
greenback versus a basket of six other major currencies, rose
0.3 percent to 79.176.
The yen also rose broadly. It gained some 0.5 percent
against the dollar to 94.23 yen <JPY=> and 0.7 percent against
the euro to 132.88 yen <EURJPY=R>.
"Chinese stocks were dumped into the close, and that
provided an instant bid to the dollar, with everything coming
off on the back of that," said Christian Lawrence, currency
strategist at RBC Capital Markets.
The pan-European FTSEurofirst 300 index fell 1 percent while
U.S. stock futures <SPc1> were also down almost 1 percent.
Oil and metal prices and cyclical currencies like the
Australian dollar also fell as the sell-off in China gathered
pace.
V-SHAPED RECOVERY HOPES WANING
The sharp reversal in China has badly shaken confidence,
even though some form of correction had been widely expected
after a rally in share prices stretching back to early March.
"It goes back to disappointing consumer sentiment figures in
the U.S. last week," said Heino Ruland, strategist at Ruland
Research, in Frankfurt.
"There is no sign that we can expect a V-shaped global
recovery and the realisation of this will take the heat out of
the market. Earnings forecasts are still too high."
Bank of Communications <3328.HK><601328.SS>, China's
fifth-largest lender, will kick off first-half results for its
financial sector on Wednesday, followed by two of the world's
biggest banks by market value later in the week: Industrial and
Commercial Bank of China <1398.HK><601398.SS> and China
Construction Bank <0939.HK><601939.SS>.
U.S. Treasury and euro zone government debt prices rose,
pushing their yields lower. The benchmark 10-year U.S. T-note
yield was down seven basis points at 3.444 percent <US10YT=RR>
while the 10-year Bund yield was about four basis points lower
on the day at 3.262 percent <EU10YT=RR>.
UK gilts got an extra lift but sterling fell broadly after
minutes from the Bank of England's August meeting showed the
Monetary Policy Committee was split on whether to up the amount
of gilt purchases it makes by even more than it did.
Six MPC members were in favour of the 50 billion pound
($82.33 billion) increase to 175 billion pounds, but three,
including BoE Governor Mervyn King, wanted to bolster the
programme by 75 billion pounds. []
(Additional reporting by Tamawa Desai, Brian Gorman and Kevin
Plumberg in Hong Kong; editing by Patrick Graham)
