TOKYO - Global stock markets sank Tuesday, led by a plunge in the Shanghai index, after a renewed slump in the price of oil kept investors on edge about the world economy.
France's CAC 40 fell 1.7 percent in early trading to 4,239.19 and Germany's DAX lost 1.4 percent to 9,598.50. Britain's FTSE 100 slipped 1.4 percent to 5,793.98.
U.S. markets were set to open higher, with Dow futures gaining 0.3 percent and broader S&P 500 futures adding 0.4 percent.
The Shanghai Composite dropped 6.4 percent to finish at 2,749.78, the lowest since December 2014, when the index was beginning a rally that peaked last June. Japan's Nikkei 225 lost 2.4 percent to 16,708.90. South Korea's Kospi slipped 1.2 percent to 1,871.69. Hong Kong's Hang Seng was down 2.6 percent at 18,831.87. Other regional markets were also mostly down.
Plunging oil prices have been hitting profits at energy companies and getting investors worried the fall in energy costs could add to deflationary pressures in major economies. Slower growth in China is one reason for oil prices to fall. The slide also reflects oversupply including new sources of production such as shale oil in the U.S. Oversupply is set to be compounded by the lifting of sanctions on Iran, allowing it resume oil exports.
In China, investors were in near-panic in the absence of a shift in government policies and economic fundamentals, according to Chen Yong, market strategist for Lianxun Securities. The approach of the Lunar New Year didn't help, as players become reluctant to invest for fear of any unexpected sharp falls in overseas markets.
"It's just another in a long series of slumps that we have seen in this market, and it's not the last we will see either because the market is still overpriced. And too many people want to get their money out. It's been a bubble since it began last summer," said Michael Every, who heads Financial Markets Research, Asia-Pacific, at Rabobank. He expects another 10 percent drop or more in Shanghai shares before things settle down.
Benchmark U.S. crude was down 85 cents at $29.49 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.85, or 5.7 percent, to $30.34 a barrel in New York on Monday. Brent crude, a benchmark for international oils, lost $1.01 to $29.49 a barrel in London. It fell $1.68, or 5.2 percent, to $30.50 a barrel the previous day.
The dollar fell to 117.74 yen from 118.23 yen in the previous trading session. The euro inched up to $1.0870 from $1.0850.