Stocks, oil tumble as China economy concerns mount

Shares on major exchanges fell for a sixth consecutive day on Thursday and crude prices touched multi-year lows as investors fretted over the state of the Chinese economy and its ability to stabilize its stock market.

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China suspended a circuit breaker set up at the start of 2016 that stopped trading for the day when stocks fell 7 percent, a halt that had already triggered twice this week.

Analysts and investors said the mechanism, put in place to avoid market volatility, may have backfired.

Images related to China's stock market:

In a move that deepened concerns over China's economic health, the People's Bank of China (PBOC) set the yuan midpoint rate lower for an eighth consecutive day. The 0.5 percent decline was the biggest between daily fixings since August.

"People see the weakness in China and in the overall equity market and think there's going to be an impact on corporations here in the United States," said Robert Pavlik, chief market strategist at Boston Private Wealth in New York.

The Dow Jones industrial average .DJI fell 388.34 points, or 2.3 percent, to 16,518.17 in what could be its worst start to a year in more than a century.

The S&P 500 .SPX lost 45.09 points, or 2.27 percent, to 1,945.17 and the Nasdaq Composite .IXIC dropped 130.87 points, or 2.71 percent, to 4,704.90.

The pan-European FTSEurofirst 300 index .FTEU3 and the euro zone's blue-chip Euro STOXX 50 .STOXX50E index closed down 2.3 percent and 1.7 percent, respectively.

A gauge of major stock markets globally .MIWD00000PUS fell 1.9 percent and Nikkei futures NKc1 were down 2.6 percent.

CURRENCY WAR BREWING

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 move risks triggering a cycle of competitive devaluation, said Mexican Finance Minister Luis Videgaray.

This graphic shows how currencies, stocks, commodities, bonds and some economic indicators have reacted to the yuan decline since August: reut.rs/1VMvXYf

The U.S. dollar tumbled 1 percent against a basket of currencies .DXY, losing 1.5 percent to $1.0937 against the euro EUR= and 0.8 percent to the yen JPY= at 117.48.

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Brent crude cut a loss of more than 6 percent to trade down 1.6 percent, while U.S. crude CLc1, down as much as 5.5 percent earlier, was down 2.3 percent.

The benchmark U.S. Treasury yield US10YT=RR touched its lowest since late October. U.S. 10-year Treasury notes were last up 8/32 in price to yield 2.1491 percent from 2.177 percent late on Wednesday.

Gold climbed above $1,100 an ounce for the first time in nine weeks as the dollar fell and investors rushed into perceived havens. Spot gold XAU= was last up 1.3 percent at $1,109 an ounce. Its 4.6 percent gain so far this week is the best four-day run for gold in a year.

(Reporting by Rodrigo Campos, additional reporting by Caroline Valetkevitch; Editing by Nick Zieminski and Meredith Mazzilli)

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