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Dow futures down triple digits after China market rout

New trading year off to bearish start

U.S. stock index futures pointed to a sharply lower open on Wall Street Monday, the first trading day of 2016, amid a sharp sell-off in Chinese stocks and heightened geopolitical tensions between Iran and Saudi Arabia.

Dow futures held about 320 points lower after earlier falling more than 330 points.

Feeble manufacturing surveys in China revived concerns over the slowdown in the world's second largest economy. Fresh manufacturing PMIs on Monday showed a fall to 48.2 in December, from 48.6 in November, contracting for a 10th month and coming in below a Reuters poll forecast for 49.0.

The distinctly risk-off mood was highlighted as the Shenzhen Composite had its worst day since early 2007, closing down 8.2 percent. The Shanghai Composite ended down 6.86 percent and trading on both exchanges was temporarily halted as the authorities implemented a "circuit breaker" for the first time.

In Europe, the pan-European STOXX 600 was down about 2.4 percent in morning trade with Germany's DAX briefly slumping more than 4 percent.

Meanwhile, rising tensions between Iran and Saudi Arabia provided little risk premium to oil prices on Monday. Prices had moved higher after a breakdown in diplomatic ties that could still lead to supply restrictions in the Middle East. Saudi Arabia severed diplomatic ties with Iran over the weekend after Iranian protesters stormed Saudi Arabia's embassy in Tehran Sunday following Saudi Arabia's execution of Shiite cleric Nimr al-Nimr on Saturday.

Back in the U.S., a PMI manufacturing index is due at 9:45 a.m. ET and a ISM manufacturing Index is due at 10 a.m. ET. San Francisco Fed President John Williams will be speaking on the implementation of macroprudential policies by central banks at the AEA Annual Meeting in California at 5:30 p.m.

The event in San Francisco is on the minds of investors as the pace of interest rate hikes remain in focus. Loretta Mester, president of the Cleveland Fed, told Reuters in an interview Sunday that she did not need to see clear evidence of inflation to back more policy tightening after the Fed's initial rate hike in mid-December.

—CNBC's Patti Domm, Arjun Kharpal and Saheli Roy Choudhury contributed to this report.