People walk past on a crossing in Tokyo on Monday. Associated Press

A surprisingly sharp slowdown in Chinese economic activity and a rapid Taliban takeover in Afghanistan helped drive global shares lower on Monday.

All three major US indices opened Monday sharply lower, after posting fresh record highs last week. The Dow Jones Industrial Average fell 134.63 points, or 0.38%, in early trading, while the S&P 500 lost 0.30% and the Nasdaq Composite dropped 0.32%.

China’s factory output and retail sales growth slowed sharply and missed expectations in July, as new COVID-19 outbreaks and floods disrupted business operations, adding to signs the economic recovery is losing momentum.

Industrial production in the world’s second largest economy increased 6.4% year-on-year in July, data from the National Bureau of Statistics (NBS) showed on Monday.

Retail sales increased 8.5% in July from a year ago, far lower than the forecast 11.5% rise and June’s 12.1% uptick.

Asian share markets slipped on Monday after the data showed a surprisingly sharp slowdown in the engine of global growth.

The disappointing data out of China also ended a 10-day run of gains for European stocks, with commodity-linked stocks - which are sensitive to demand from China - falling the most. The pan-European STOXX 600 index was down 0.5% past midday in London, easing from record levels last week. The MSCI world equity index, which tracks shares in 45 nations, was down 0.57%.

Meanwhile, US Treasury yields slipped as demand for less risky US bonds ticked up. Benchmark 10-year yields fell to 1.235%. The yield curve between two-year and 10-year notes flattened 4 basis points to 103 bps.

Figures on July retail sales, industrial production and urban investment in China all missed forecasts, a trend that is only likely to get worse given the recent tightening in coronavirus restrictions there.

Further adding to dour investor sentiment was the sudden collapse of the Afghan government and what it may mean for political stability in the region.

That overall risk off mood also helped boost the dollar, sending it back to 92.589, up 0.1% on the day against a basket of currencies.

Investors this week will also be looking for fresh indications from the US Federal Reserve as to when the central bank might consider easing off on its massive stimulus. Minutes from the Fed’s last policy meeting are due out on Wednesday, while Fed chair Jerome Powell is speaking Tuesday.

In commodity markets, gold ticked up to $1,784, shaking off losses posted last week. US gold futures were up 0.46% at $1,786.40.

Oil fell by over 3% on Monday to a one-week low, dropping for a third session after official data showed refining throughput and economic activity slowed in China, an indication that COVID-19 outbreaks are crimping the world’s second-largest economy.

Brent crude was down $2.21, or 3.1%, at $68.38 a barrel by 1347 GMT. US oil fell by $2.42, or 3.5%, to $66.02.

Doubts about the speed of economic recovery were also heightened after US consumer sentiment dropped sharply in early August to its lowest in a decade, a University of Michigan survey showed late last week.

The International Energy Agency (IEA) last week said that rising demand for crude oil reversed course in July and was expected to increase at a slower rate over the rest of 2021 because of surging COVID-19 infections from the Delta variant.

Japan’s economy rebounds: Japan’s economy grew slightly in the second quarter, recovering from a slowdown at the start of the year despite continuing virus surges and restrictions, data showed Monday.

The world’s third-largest economy contracted at the beginning of the year as a new wave of infections forced the government to impose virus restrictions that slowed consumption.

But despite continued virus worries and restrictions that have lasted most of this year, Japan’s economy grew a better-than-expected 0.3 percent in the three months to June, data from the cabinet office showed.

That slightly exceeded the expectations of economists surveyed by Bloomberg, who had forecast just 0.1 percent quarter-on-quarter growth.

The data released by the cabinet office also showed a slight upwards revision for the first quarter, when the economy shrank 0.9 percent, compared with a previous estimate of 1.0.

Japan has seen a smaller virus outbreak than many developed economies, with 15,400 deaths despite avoiding harsh lockdowns.

But for much of this year Tokyo and several other regions have been under virus states of emergency, limiting alcohol sales and restaurant and bar opening hours.

Experts have warned the measures are losing their effectiveness, with signs the rules are being increasingly flouted.

Stefan Angrick, a senior economist at Moody’s Analytics covering Japan, said consumption proved surprisingly resilient despite the restrictions.

“The Japanese economy eked out some moderate growth in the second quarter of the year, avoiding a technical recession thanks to a combination of stronger consumption and business investment,” he said in a note.