NEW YORK Stocks across the world fell on Wednesday as China fuelled fears about its economy by allowing the yuan to weaken further and after a nuclear test by North Korea added to a growing list of geopolitical worries.
Brent crude futures tumbled to 11-year lows as a row between Saudi Arabia and Iran made any cooperation between major exporters to cut output even more unlikely. WTI fell below $34 a barrel to its lowest since Feb. 2009.
Energy stocks led the slide on Wall Street, with the S&P 500 at a three month low despite strong U.S. job market data. Losses grew after minutes from the latest Federal Reserve meeting showed some Fed officials were worried inflation could get stuck at dangerously low levels.
Traders and economists feared the move from China to further depreciate the yuan may mean the world's second-biggest economy is even weaker than had been expected and that it could trigger another wave of competitive devaluations.
North Korea's announcement that it had successfully tested a hydrogen nuclear device added to geopolitical worries stirred by a row between Saudi Arabia and Iran. The White House said Pyongyang might not in fact have tested a hydrogen bomb, which is much more powerful than an atomic bomb.
"It's scary when you see the second largest economy on the planet seemingly melting down," said Brad McMillan, chief investment officer at Commonwealth Financial in Waltham, Massachusetts.
"There are very legitimate reasons for concerns," he said, citing the Saudi-Iran row and the report of North Korea's hydrogen bomb test. "You could argue the market response has been very rational."
The Dow Jones industrial average .DJI fell 302.56 points, or 1.76 percent, to 16,856.1, the S&P 500 .SPX lost 33.12 points, or 1.64 percent, to 1,983.59 and the Nasdaq Composite .IXIC dropped 75.46 points, or 1.54 percent, to 4,815.97.
MSCI's World index of developed market stocks .WORLD hit a 3-month low and emerging market shares .MSCIEF were at their lowest since mid 2009.
Nikkei futures NKc1 were down 2.7 percent and in Europe the FTSEurofirst 300 .FTEU3 closed down 1.3 percent.
The U.S. Treasury benchmark yield hit its lowest in more than two weeks on safe-haven demand and on signs that a lack of inflationary pressures could slow the pace of Federal Reserve interest rate hikes this year.
U.S. 10-year Treasury notes US10YT=RR were last up 21/32 in price to yield 2.1755 percent, from a yield of 2.25 percent late Tuesday.
Spot gold XAU= rose 1.5 percent to $1,093.66 an ounce.
Brent crude oil prices hit new 11-year lows as the face-off between Saudi Arabia and Iran over Riyadh's execution of a Shi'ite cleric was seen extinguishing any chance of major producers cooperating to cut production.
"Shale production and increasing capacity from countries like Russia who need to protect revenue, combined with expectations of further Iranian supply, mean actual production as well as expectations of future production are rising," said Michael Hewson, chief market analyst at CMC Markets.
Global benchmark Brent crude LCOc1 fell more than 6 percent to $34.15 a barrel and U.S. crude futures CLc1 were down 5.9 percent at $33.85.
U.S. government data showing an unexpected 5.1 million-barrel fall in crude stocks last week was overshadowed by a 10.6 million-barrel surge in gasoline supplies, the biggest build since 1993.
The Thomson Reuters/CoreCommodity CRB index .TRJCRB hit its lowest since August 2002.
(Additional reporting by Simon Falush in London and Chuck Mikolajczak and Catherine Ngai in New York; Editing by Nick Zieminski and Chizu Nomiyama)
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