GLOBAL MARKETS-China share slump rattles global markets

* Investors cut riskier assets after China share slide

* U.S. shares poised to follow Europe, Asia markets down

* Dollar, yen advance

By Emelia Sithole-Matarise

LONDON, Aug 19 (Reuters) - U.S. shares were poised to follow
European and Asian stocks down on Wednesday after a slump in
Chinese shares and growing investor concerns over the
sustainability of the global economic recovery.

Government bonds and the dollar firmed after the Shanghai
composite index .SSEC slid 4 percent to a two-month closing
low on disappointment that authorities were not taking steps to
support the market amid heavy losses. It has fallen 20 percent
since two weeks ago, rattling global markets.

The S&P 500 futures index SPc1 was down 0.9 percent while
European shares .FTEU3, were 0.5 percent lower. They came
slightly off session lows after data showed U.S. mortgage
applications rose for the third week running last week, boding
well for the hard-hit U.S. housing market. [ID:nNYS005321]

The dollar index, which tracks the performance of the
greenback versus a basket of six other major currencies, was up
0.2 percent at 79.085 .DXY. The yen also gained broadly.

"The fact that the declines in the Shanghai index are
happening at the same time as G7 equities are falling is
detrimental to risk appetite," CMC Markets analyst Ashraf Laidi
said.

"Because there are no major figures in the U.S. there is
very little that could alter this negative tone in risk
appetite."

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.

"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," said Heino
Ruland, strategist at Ruland Research, in Frankfurt.

Bank of Communications (3328.HK)(601328.SS), China's
fifth-largest lender, will kick off first-half results for the
country's financial sector on Wednesday. It will be followed by
two of the world's biggest banks by market value -- Industrial
and Commercial Bank of China (1398.HK)(601398.SS) and China
Construction Bank (0939.HK)(601939.SS) -- later in the week.

U.S. Treasury and euro zone government debt prices rose,
pushing their yields lower. The benchmark U.S. 10-year T-note
yield was down about 8 basis points at 3.439 percent US10YT=RR
while the 10-year Bund yield was three basis points lower on the
day at 3.27 percent EU10YT=RR.

British 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 over 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. [ID:nSP485184]

(Additional reporting by Jessica Mortimer and Brian Gorman,
Editing Lin Noueihed)