Shanghai Composite drops 4%, hits lowest since May 25

• Shanghai Composite slides after a 1000 point drop in Dow.
• Rising yields led risk-off continues

Shanghai Composite gapped lower today and fell to $3071.26 - its lowest level since May 25.

As of writing, the index is trading at $3127; down 4.11 percent on the day. The drop followed the 1000 point slide in the Dow index yesterday.

The rising bond yield environment is not boding well for the stock markets across the globe. Further, China reported a drop in the factory-gate inflation (December PPI) for the third straight month, signaling the reflation story is losing ground.

That said, the S&P 500 futures are up 0.4 percent, possibly due to reports that the People's Bank of China (PBOC) has added around CNY 2 trillion in liquidity. So, the sell-off could come to a halt.