While you were sleeping: Panic seizes global markets

China, UK plunge; US pares back early losses.

Wall Street plunged in the first 10 minutes of trading after Chinese stocks plummeted but pulled back in later trading. 

"Anybody with a pulse was nervous when the market opened," Los Angeles-based Wedbush Securities managing director of equity trading Michael James told Reuters.

"The only thing that's certain is the volatility is going to continue in the short term, given the magnitude of the moves that we've already had in the past four days."

The Dow Jones Industrial Average sank more than 1000 points after trading opened on Monday but rebounded to trade 438.50 points lower, amid concern about China's economic health and the impact on global growth. China's benchmark Shanghai Composite Index tanked 8.5%.

Oil and other commodities slumped as well. US crude moved below $US38 a barrel for the first time more than six and-a-half years. It last traded at $US38.64, down 4.5%.

"It's a bloodbath," Mark Hanson, an analyst who follows US crude explorers at Morningstar in Chicago, told Bloomberg. "We're at an intersection of a lot of bad news."

In late afternoon trading in New York, the Dow Jones Industrial Average dropped 2.7%, the Standard & Poor's 500 Index slid 2.5%, while the Nasdaq Composite Index fell 2%.

A gauge of investors' concerns, the CBOE Volatility Index or VIX, climbed 24.8% to 34.97 after rising as high as 53.29 earlier in the session.

"I think emotions got the best of investors," New York's Ladenberg Thalmann Asset Management chief executive Philip Blancato told Reuters.

"The conjecture that the Chinese economy can propel the US economy into recession is ridiculous when it's twice the size of the Chinese economy and is consumer based."

Slides in shares of DuPont and those of Cisco, down 3.7% and 3.6% respectively, led the Dow lower. Bucking the trend was Intel; its shares last traded 1.9% higher.

Shares of Apple last traded 0.8% lower at $US104.96, after the stock had sunk as low as $US92 earlier in the session.

Apple's chief executive, Timothy Cook, opted to email Jim Cramer, the television host of CNBC's "Mad Money," with an update on the company's performance in China.

"I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August," Mr Cook says in the email. "Obviously I can't predict the future but our performance so far this quarter is reassuring."

In Europe, the Stoxx 600 Index ended the day with a 5.3% drop from the previous close. The UK's FTSE 100 Index sank 4.7%, as did Germany's DAX Index, while France's CAC 40 Index plunged 5.4%.

The DAX "will certainly be at the forefront of declines in Europe," London-based RMG Wealth Management chief investment officer Stewart Richardson told Bloomberg.

"This could go down quite a bit. Traders are looking for the positions which are easier to get out of, more liquid, and where they have the biggest exposure – and Germany fits those counts."