China's stock market crisis deepens as Iron is cheaper than CABBAGES

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Shares continued to tumble in the morning before rallying later in the day
Price of iron ore falls 10 per cent – its biggest one-day hit ever overnight
Police and regulators launch joint investigation into 'vicious short-selling'
Fears grow of 1929-style crash as $3trillion is wiped off shares in weeks

By Simon Tomlinson and Darren Boyle for MailOnline

Published: 21:08 EST, 8 July 2015 | Updated: 03:51 EST, 9 July 2015

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China's stock markets rallied today but did little to ease fears of a devastating meltdown, with commodity prices continuing to plummet and Beijing accused of 'losing control' over the crisis.

Shares tumbled in the morning before soaring later in the day, bringing light relief from a downward spiral that has seen almost $3trillion wiped off valuations in just three weeks.

But commodity prices continued to take a hammering, with one analyst saying a tonne of iron ore was now cheaper than a tonne of cabbages after suffering its biggest one-day hit ever overnight.

Police and security regulators also launched a joint probe today into 'vicious short-selling', the practise of selling stock that is not actually held, in anticipation of a future fall in prices.

Mark Mobius, chairman of Templeton Emerging Markets Group, said the move 'suggests desperation' by the leadership.

'It actually creates more fear because it shows that they've lost control,' he told Bloomberg News.

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Desperate times: China's economic meltdown continued apace today, with a tonne of iron ore now cheaper than a tonne of cabbages, although stock markets rallied in the afternoon to give some temporary relief

Values on the Chinese stock market have plunged by more than a third since June due to investor panic

The government, regulators and financial institutions have waged a concerted campaign to prevent the country heading towards the biggest financial disaster since the 1929 Wall Street crash.

That appeared to have taken some effect after Asian markets rose today, tracking a surge in Shanghai after China announced new measures to staunch a mainland rout that has fuelled fears about the wider economy.

The gains come after regional shares took a battering yesterday as shell-shocked traders were buffeted by the crisis in China, which has wiped trillions off of valuations, and fears about Greece's future in the eurozone.

Shanghai tumbled 3.40 per cent at the open but soared in the afternoon to sit 6.38 per cent higher – a 10 per cent swing – while Hong Kong lost 0.45 per cent soon after opening but in late trade was up four per cent.

Tokyo recovered from losses of more than three percent to end 0.60 per cent, or 117.86 points, higher at 19,855.50.

Seoul added 0.58 per cent, or 11.60 points, to 2,027.81 and Sydney was slightly higher, adding 1.50 points to 5,471.00 - both indexes had fallen about 1.6 percent in the morning.

No indication malicious actors involved in NYSE issue

Regulators have blasted investors for the 'irrational selling of stocks' which is forcing their value down further

After a series of failed measures, China's market regulator Wednesday barred 'big' shareholders – defined as those with stakes of more than five per cent – and executives of listed companies from selling their shares for the next six months.

'Investor confidence is recovering,' Zhang Gang, an analyst from Central China Securities, told AFP.

Shanghai had risen more than 150 per cent in the 12 months to its June 12 peak in a borrowing-fuelled frenzy enhanced by hopes for economy-boosting measures by the government.

However, it has given up about 30 per cent since then.

Analysts said new restrictions on margin trading and concerns about the overvaluation of many stocks have forced mainland investors – mostly individual retail traders – to cash out.

'We're clearly in the middle of a market panic of some magnitude in China and unfortunately the regulator response has really been quite harmful so far,' Michael Shaoul, chief executive officer at Marketfield Asset Management in New York, told Bloomberg TV.

On commodities markets the spot price of iron ore, a key export to China, took its biggest one-day hit ever overnight, falling 10 per cent to $44.59 a tonne – its lowest since May 2009.

'The risk from Chinese equities markets is clearly impacting commodities markets,' IG Markets strategist Evan Lucas said in a note.

One analyst has described the current situation as 'a stampede' as investors trying and cut their losses

'The steel price in China is now cheaper per tonne than cabbage.'

While copper jumped as the US dollar slipped, oil prices also eased although they recovered slightly Thursday.

US benchmark West Texas Intermediate for August delivery was up 87 cents at $52.52 and Brent crude for August rose 81 cents to $57.86 a barrel in afternoon trade following recent sharp losses.

Gold fetched $1,163.11 compared with $1,155.39 late Wednesday.

The recovery in markets bled through to currency trading.

The Japanese unit was changing hands at 121.37 to the dollar and 134.66 to the euro, down from 120.71 and and 133.68, although it is still stronger than the 122 and 135 range seen at the start on the week.

Chinese markets have improved by 1.5 per cent as a result on the newly imposed trading restrictions

Dealers are also tracking events in Europe after Greece was given a Sunday deadline to come up with a bailout reform plan its creditors find acceptable or face ejection from the eurozone.

European leaders slapped the ultimatum on Athens after last weekend's referendum in which Greek voters rejected austerity-packed reforms in return for more cash.

They have warned the country's leadership that if it does not provide detailed measures, a contingency plan is in place to deal with its removal from the euro area.

European equities brushed off the huge losses in Asia to end higher on hopes for a resolution to the Greek crisis after Prime Minister Alexis Tsipras vowed to present 'credible' reform plans.

'European equities (are) positive (which) suggests hope of progress before the weekend deadline,' noted Mike van Dulken, head of research at Accendo Markets.

Frankfurt added 0.66 per cent, Paris rose 0.75 percent and London was up 0.91 per cent.

In foreign exchange trade Thursday the euro was at $1.1095 against $1.1074 in New York but well up from the levels below $1.1000 earlier Wednesday in Asia.