* Shanghai market falls 8.5 percent, biggest daily loss since 2007
* Dollar falls more than 1 percent against euro
* Packed week for corporate earnings and data
* Fed meets on Tuesday and Wednesday
By Patrick Graham
LONDON, July 27 (Reuters) - European stocks and major commodity prices fell hard on Monday as concerns over China dominated financial markets in the wake of the biggest drop in Shanghai shares in eight years.
The dollar was weak ahead of the week's main set piece - Wednesday's Federal Reserve policy decision and statement - with a better than expected survey of German business sentiment pushing the euro above $1.11 for the first time in a fortnight.
But it was the stunning 8.5 percent fall in Shanghai that drove most of the moves early in the European day, with share indices in Frankfurt, London and Paris all sinking by more than 1 percent. .FTSE .GDAXI .FCHI
Traders and investors said that was all rooted in broader concerns over global growth mid-way through the corporate results reason and following a poor economic reading out of China late last week.
"This really has its roots in nervousness that began in the U.S. at the end of last week," said Andy Sullivan, a portfolio manager with Swiss investment firm GL Financial Group.
"Shanghai is an artificial market at the moment reliant on government support, and they have thrown the kitchen sink at it in recent weeks. The selling just ratcheted up steadily this morning."
The CSI300 index .CSI300 of the largest listed companies in Shanghai and China's other major market, Shenzhen, ended 8.5 percent lower. Japan's Nikkei .N225 slipped more than 1 percent, while MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1.6 percent.
Both copper, for which Chinese demand is an important driver, and the broader Thomson Reuters CRB commodities index .TRJCRB hit their lowest in six years. Copper futures CMCU3 were down another 0.5 percent on Monday.
FED UP?
Despite the still patchy economic news, many analysts still expect the U.S. central bank to raise interest rates in September.
Fed chief Janet Yellen drove the dollar higher earlier this month by saying a move this year was on the cards, but she has gone no further than that.
"We expect Fed voters to pull the trigger in September, but for the path to interest rate normalisation to be a long one given the global risk profile," said analysts at Australia and New Zealand Banking Group in a note to clients.
Expectations of a hike have slowly pushed up U.S. Treasury yields and widened the dollar's premium over the euro. But the euro has also tended to rise when investors get more concerned about global growth and rein in riskier bets, as they were doing on Monday.
After the upbeat Ifo survey of German business sentiment ECONDE , the common currency was up 1.1 percent $1.1101 EUR= 3 full cents above this month's lows around $1.0810.
Brent crude LCOc1 fell 30 cents to $54.32 a barrel, touching its lowest in almost four months. U.S. crude CLc1 was off 21 cents at $47.93. ($1 = 7.7504 Hong Kong dollars)