Investors got a reminder on Tuesday of the potential for China's currency moves and renewed selling in crude to jar financial markets.
U.S. stocks slumped from six-week highs, with the Dow Jones Industrial Average falling more than 150 points, as crude plunged on speculation OPEC members won't curb output. Equities from Europe to emerging markets slid earlier as China's central bank unexpectedly weakened the yuan, rekindling concern about the state of the world's second-largest economy. The yen rose with gold on haven demand and Treasuries advanced.
The boost in demand for haven assets is a sign that China still has the capacity to disrupt the relative calm in markets that led to a rebound in commodities and stocks in the past week. The cut in the fixing on Tuesday was more than some analysts predicted and the biggest since a run of reductions in January roiled markets and escalated fears of a global currency war. Oil's renewed slump took it below $32 a barrel in New York.
“The nervousness about China is still there and oil prices haven't stabilized,” said Heinz-Gerd Sonnenschein, a strategist at Deutsche Postbank AG in Bonn, Germany. “We'll continue with volatile markets for weeks or months, until this nervousness about global growth and oil as a reflection of global growth subsides.”
The Standard & Poor's 500 Index fell 1.1% at 11:17 a.m. in New York, after rallying on Monday to a six-week high. The index is down more than 9% from a May record and 5% lower this year on concern that weakness in China will damp global growth, and that lenders will suffer as some energy producers struggle to stay solvent amid low oil prices.
Energy shares led declines on Tuesday with materials producers. Freeport-McMoRan Inc. declined 6.5% and Chevron Corp. sank 2%. Lenders, which have buttressed the latest rebound in equities, fell with JPMorgan Chase & Co and Citigroup Inc. losing at least 2.8%.
Data showed sales of previously owned U.S. homes unexpectedly rose in January to the second-highest pace since early 2007. Near record-low mortgage rates, steady job gains and better wage growth are helping encourage prospective buyers, including first-time purchasers. A separate report indicated the Conference Board's consumer confidence index decreased to 92.2 in February from a revised 97.8 a month earlier.
The Stoxx Europe 600 Index lost 1.2%, paring losses of as much as 1.1%. BHP Billiton Plc's first lowering in its payout in 15 years and a surprise loss posted by Standard Chartered Plc show how the global slowdown and tumbling prices for metals and oil are weighing on earnings.
Emerging-market stocks fell from a six-week high as economic data signaled China's slowdown is deepening and the People's Bank of China cut the yuan's reference rate by the most in six weeks.
Shares in South Africa declined 1.2% while the S&P BSE Sensex Index ended a four-day advance in Mumbai before a parliamentary budget session. Turkish stocks and the lira extended gains after policy makers kept interest rates unchanged. The Shanghai Composite Index decreased from a one-month high and the yuan depreciated for a third day. Indian government bonds retreated along with Eastern European currencies.
Brazil's annual inflation surprised analysts by accelerating in the month through mid-February after the central bank refrained from raising borrowing costs.
Oil slipped below $32 a barrel after Saudi Arabia indicated it won't cut oil production as other countries would be unlikely to assist in restraining output, leaving the burden of adjusting supply with high-cost producers. Earlier, Iran called a proposal by Saudi Arabia and Russia to freeze oil production “ridiculous.”
Zinc retreated 2.1% on the London Metal Exchange, falling from its highest close in four months. Copper, lead and nickel also fell.
Gold led precious metals higher, gaining 1.1% to $1,221.45 an ounce as investor holdings in exchange-traded funds jump to the highest in almost a year.
The yen gained 0.8% to 111.96 per dollar, rallying from a decline Monday.
The yuan fell 0.08% to 6.5279 a dollar, according to China Foreign Exchange Trade System prices. The PBOC lowered the daily reference rate 0.17%. The fix was lower than most models were expecting, said Sue Trinh, the head of Asia foreign-exchange strategy at Royal Bank of Canada. China's shock devaluation of the yuan in August triggered a bout of global market turmoil.
Britain's referendum on its membership in the European Union is also raising currency-market risks across the continent, with the cost of options protecting against losses on the euro jumping.
The pound dropped 0.3% to $1.4105, while the euro slid 0.3% to $1.0996. The U.K.'s potential exit may damage trade and encourage other members to renegotiate their relationship with the EU, signaling scope for further losses in the euro in the run-up to Britain's June 23 referendum.
The Swiss franc added 0.9% to 1.09217 per euro. Brazil's real dropped 0.5% against the dollar.
Treasuries erased losses, pushing 10-year yields to 1.74%, as stocks and oil declined.
Bonds fell, with the yield on 10-year German bunds rising two basis points to 0.20%.