China turmoil sends oil, stocks sliding

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Shanghai Comp Plunges 7 Percent, Yuan Set Weaker

Global shares tumbled for a sixth day on Thursday and oil prices slid to levels not seen since the early 2000s, after China guided the yuan lower and Shanghai shares tumbled by 7 percent, igniting fears of competitive devaluations across Asia.

Less than half an hour after the market opened, Chinese stock trading was suspended for a second time this week.

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Brent crude prices skidded over 5 percent to an almost-12-year-low of $32.16 LCOc1, with worries over weaker demand from China adding to a persistent drag on prices caused by oversupply and near-record output levels.

European stock markets followed Asia lower, with the pan-European FTSEurofirst 300 index .FTEU3 down 2.3 percent and the euro zone's blue-chip Euro STOXX .STOXX50Eindex falling 2.5 percent.

MCCI's 46-country All World index .WORLD fell 1 percent to hit a three-month low, the sixth straight day of losses. The benchmark emerging stock index .MSCIEF slid 2.5 percent to a 6 1/2-year low as investors dumped risky assets.

"It's looking pretty ugly," said hedge fund manager and chief investment officer Andreas Clenow at ACIES Asset Management in Zurich. "We've been scaling down equity positions. It's time to take a step back to re-evaluate the situation."

Images from China's stock market in January:

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China Stock market Jan 2016
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China turmoil sends oil, stocks sliding
LIANYUNGANG, Jan. 7, 2016-- A bank staff member checks RMB banknotes at a bank in Lianyungang, east China's Jiangsu Province, Jan. 7, 2016. The central parity rate of the Chinese yuan against the U.S. dollar weakened to 6.5646 per dollar on Jan. 7, the lowest since March 2011. (Xinhua/Si Wei via Getty Images)
A woman reacts near a display board showing the plunge in the Shanghai Composite Index at a brokerage in Beijing, China, Thursday, Jan. 7, 2016. Chinese stocks nosedived on Thursday, triggering the second daylong trading halt of the week and sending other Asian markets sharply lower as investor jitters rippled across the region. (AP Photo/Ng Han Guan)
Chinese pedestrians walk past a giant U.S. dollar note on a display board of a bank in Beijing, China, Thursday, Jan. 7, 2016. This weekâs plunge in Chinese stocks was fueled by concern Beijing is letting Chinaâs currency, the yuan, weaken too fast against the U.S. dollar. (AP Photo/Ng Han Guan)
SHENYANG, Jan. 7, 2016-- An investor looks through stock information at a trading hall of a securities firm in Shenyang, capital of northeast China's Liaoning Province, Jan. 7, 2016. Trading was halted for the day on the Shanghai and Shenzhen stock markets Thursday morning after shares tumbled over 7 percent as the circuit breaker mechanism was triggered. (Xinhua/Yang Qing via Getty Images)
Investors look at screens showing stock market movements at a securities company in Beijing on January 7, 2016. Chinese markets were suspended on January 7 for the second day this week after they fell more than seven percent, leading an Asia-wide sell-off as China weakened the value of the yuan currency by the most since August. AFP PHOTO / FRED DUFOUR / AFP / FRED DUFOUR (Photo credit should read FRED DUFOUR/AFP/Getty Images)
Investors look at screens showing stock market movements at a securities company in Beijing on January 7, 2016. Chinese markets were suspended on January 7 for the second day this week after they fell more than seven percent, leading an Asia-wide sell-off as China weakened the value of the yuan currency by the most since August. AFP PHOTO / FRED DUFOUR / AFP / FRED DUFOUR (Photo credit should read FRED DUFOUR/AFP/Getty Images)
HANGZHOU, CHINA - JANUARY 07: (CHINA OUT) An investor reacts at a stock exchange hall on January 7, 2016 in Hangzhou, Zhejiang Province of China. Chinese shares slumped to a halt in half an hour on Thursday which was the second halt in the four trading days of 2016. The Shanghai Composite Index fell 245.96 points, or 7.32 percent, to halt at 3,115.89. (Photo by ChinaFotoPress/ChinaFotoPress via Getty Images)
HANGZHOU, CHINA - JANUARY 07: (CHINA OUT) An investor reacts at a stock exchange hall on January 7, 2016 in Hangzhou, Zhejiang Province of China. Chinese shares slumped to a halt in half an hour on Thursday which was the second halt in the four trading days of 2016. The Shanghai Composite Index fell 245.96 points, or 7.32 percent, to halt at 3,115.89. (Photo by ChinaFotoPress/ChinaFotoPress via Getty Images)
BEIJING, CHINA - JANUARY 06: (CHINA OUT) Investors observe stock market at an exchange hall on January 6, 2016 in Beijing, China. Chinese stock market rebounded after two days' decline. The Shanghai Composite Index rose 22.53 points, or 0.69% to 3310.24 points and Shenzhen Composite Index ran up 45.83, or 0.40% to 11513.89 points. (Photo by ChinaFotoPress/ChinaFotoPress via Getty Images)
FUYANG, CHINA - JANUARY 06: (CHINA OUT) An investor observes stock market at an exchange hall on January 6, 2016 in Fuyang, Anhui Province of China. Chinese stock market rebounded after two days' decline. The Shanghai Composite Index rose 22.53 points, or 0.69% to 3310.24 points and Shenzhen Composite Index ran up 45.83, or 0.40% to 11513.89 points. (Photo by ChinaFotoPress/ChinaFotoPress via Getty Images)
FUYANG, CHINA - JANUARY 06: (CHINA OUT) An investor observes stock market at an exchange hall on January 6, 2016 in Fuyang, Anhui Province of China. Chinese stock market rebounded after two days' decline. The Shanghai Composite Index rose 22.53 points, or 0.69% to 3310.24 points and Shenzhen Composite Index ran up 45.83, or 0.40% to 11513.89 points. (Photo by ChinaFotoPress/ChinaFotoPress via Getty Images)
FUYANG, CHINA - JANUARY 05: (CHINA OUT) An investor observes stock market at an exchange hall on January 5, 2016 in Fuyang, Anhui Province of China. Following the dropping on Monday on the first day of the year 2016, the Shanghai Composite Index declined 2.89% to nearly 3,199 points and the Shenzhen Composite Index fell 4.56% to nearly 11,088 points. (Photo by ChinaFotoPress/ChinaFotoPress via Getty Images)
HUAIBEI, CHINA - JANUARY 05: (CHINA OUT) A man carries a bucket of water at an exchange hall on January 5, 2016 in Huaibei, Anhui Province of China. Following the dropping on Monday on the first day of the year 2016, the Shanghai Composite Index declined 2.89% to nearly 3,199 points and the Shenzhen Composite Index fell 4.56% to nearly 11,088 points. (Photo by ChinaFotoPress/ChinaFotoPress via Getty Images)
HUAIBEI, CHINA - JANUARY 05: (CHINA OUT) Two investors talk as they observe stock market at an exchange hall on January 5, 2016 in Huaibei, Anhui Province of China. Following the dropping on Monday on the first day of the year 2016, the Shanghai Composite Index declined 2.89% to nearly 3,199 points and the Shenzhen Composite Index fell 4.56% to nearly 11,088 points. (Photo by ChinaFotoPress/ChinaFotoPress via Getty Images)
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The People's Bank of China (PBOC) set the yuan midpoint rate CNY=SAEC at 6.5646 per dollar, 0.5 percent weaker than the previous day's fix. That was the biggest decline between daily fixings since August and the eighth day in row the PBOC had set a lower guidance rate.

Spot yuan CNY=CFXS fell to 6.5956 to the dollar, its weakest since February 2011. Offshore yuan rates hit a record low of 6.7600 to the dollar CNH=, before erasing its losses after suspected intervention by authorities.

Other regional currencies followed the yuan down as markets began to worry about competitive currency devaluations from trading partners. Singapore's dollar SGD= hit a six-year low, the South Korean won KRW= touched a four-month low, and the Malaysian ringgit MYR= slumped to a three-month trough.

Investors fear China's economy is even weaker than had been imagined, with Beijing, in a bid to help exporters, allowing the yuan's depreciation to accelerate.

"The lower yuan fixing probably signifies greater risks to the Chinese economy than we know of, leading to risk-off trades," said Jeremy Stretch, head of currency strategy at CIBC World Markets.

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FLIGHT TO SAFETY

North Korea's announcement on Wednesday that it had successfully conducted a test of a hydrogen nuclear device added to a growing list of geopolitical worries for investors.

"Geopolitical tensions stemming from Saudi-Iran tensions and North Korea's nuclear test had already heightened the 'risk off' mood," said Takashi Hiroki, chief strategist at Monex Securities in Tokyo. "Resurfacing China risk was the extra psychological blow to the markets that led to the selloff in equities."

As investors fled to safety, the yen rose about 1 percent to 117.615 per dollar JPY=, its strongest in 4 1/2 years [FRX/].

Top-rated German bonds, which are also considered a safe haven, benefited, too. Ten-year yields dropped below 0.50 percent for the first time in over a month.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 2 percent to its lowest since late September. Japan's Nikkei .N225 shed 2.2 percent.

New rules Chinese authorities introduced this week that restrict selling by large shareholders did not go down well with investors and provided little tonic to jittery markets.

"This is crazy. Chinese regulators set off on this path in July and they cannot get out of it. They have ruined whatever hope investors still had in the market," said Alberto Forchielli, founder of Mandarin Capital Partners in Hong Kong.

Data curated by FindTheCompany



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