NEW YORK (Reuters) - Stocks across the globe fell on Wednesday to their lowest in nearly three months as a move to weaken China’s currency fuelled fears about the strength of the world’s second largest economy and as Brent crude hit its lowest since 2004.
A nuclear test by North Korea added to a growing list of geopolitical worries including a row between Saudi Arabia and Iran that made any cooperation between major oil exporters to cut output even more unlikely.
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 deepened after minutes from the latest Federal Reserve meeting showed some Fed officials were worried that inflation could get stuck at dangerously low levels.
The U.S. dollar weakened and Treasury yields fell after the Fed minutes.
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 could trigger another wave of competitive devaluations in the region.
“The big influence continues to be concerns about what’s going on in China ... in what appears to be an economy getting a little out of hand,” said Stephen Massocca, chief investment officer at Wedbush Equity Management in San Francisco.
“I think there’s this theory going around that the global economy is going to slow greatly driven by a large slowdown in China.”
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.
“There are very legitimate reasons for concern,” said Brad McMillan, chief investment officer at Commonwealth Financial in Waltham, Massachusetts, citing the Saudi-Iran row and the report of North Korea’s H-bomb test.
“You could argue the market response has been very rational.”
The Dow Jones industrial average fell 252.15 points, or 1.47 percent, to 16,906.51, the S&P 500 lost 26.45 points, or 1.31 percent, to 1,990.26 and the Nasdaq Composite dropped 55.67 points, or 1.14 percent, to 4,835.77.
Apple briefly dipped below $100 for the first time since Aug. 24 and was the biggest drag on both the S&P 500 and Nasdaq. The stock ended down 2 percent.
MSCI’s World index of developed market stocks hit a 3-month low and emerging market shares were at their lowest since mid-2009. Nikkei futures were down 2 percent.
The U.S. Treasury benchmark yield hit its lowest in more than three weeks on safe-haven demand and 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 were last up 22/32 in price to yield 2.172 percent, from a yield of 2.25 percent late Tuesday.
The U.S. dollar touched a near three-month low of 118.22 yen and it lost 0.3 percent against the euro at $1.0783.
Spot gold 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 fell nearly 6 percent to $34.30 a barrel and U.S. crude futures were down 5.5 percent at $33.98.
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. Some traders said the build-up signalled a slowdown in demand that could extend the global glut.
The Thomson Reuters/CoreCommodity CRB index 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