TOKYO -- Shares sank Wednesday as China let its currency fall for a second day following a surprise devaluation that rattled global financial markets.
China's government said the devaluation of the yuan was part of reforms meant to make its exchange rate more market-oriented. But the decision has added to worries over slowing growth in the world's second-largest economy, pulling shares and prices of oil and other commodities lower.
KEEPING SCORE: The Chinese yuan's market rate fell 1.8 per cent after Tuesday's nearly 2 per cent decline, which was the biggest drop in a decade. Germany's DAX dropped 2 per cent to 11,071.06 and Britain's FTSE 100 lost 1.4 per cent to 6,574.15. France's CAC 40 shed 1.7 per cent to 5,012.38. Wall Street looked poised for further losses, with both Dow and S&P futures down 0.9 per cent.
CHINA'S DEVALUATION: The International Monetary Fund welcomed Beijing's move toward more flexible exchange rates, but many investors saw it as an attempt to stimulate a slowing economy, since a cheaper yuan will benefit China's exports by making them less expensive overseas. The devaluation triggered selling of shares, oil and other commodities on expectations of weaker demand from China.
THE QUOTE: "Markets were not expecting any major moves on the currency from the Chinese government, despite its benefits, as the risks were perceived as too high. Now that this Rubicon has been crossed, keen attention should be paid to any other significant moves to prop up the Chinese economy," Angus Nicholson, a market analyst at IG, said in a commentary.
VIETNAM DEVALUES: Vietnam doubled the trading band of its currency Wednesday to 2 per cent allow it to weaken following China's devaluation. The State Bank of Vietnam said the weaker Chinese currency would have a "negative impact" on its economy. But analysts said the move was unlikely to spur competitive devaluations and would have only a modest impact.
ASIAN SCORECARD: Japan's Nikkei 225 fell 1.6 per cent to 20,392.77 and Hong Kong's Hang Seng dropped 2.4 per cent to 23,902.51. South Korea's Kospi lost 0.6 per cent to 1,975.47 and Australia's S&P/ASX 200 slipped 1.7 per cent to 5,382.10. The Shanghai Composite Index fell 1.1 per cent to 3,886.32, and shares in Southeast Asia were also lower.
ENERGY: U.S. crude fell 3 cents to $43.05 a barrel in electronic trading on the New York Mercantile Exchange. It fell Tuesday to its lowest level in six years, losing $1.88 to $43.08 a barrel. Brent crude, a benchmark for international oils used by many U.S. refineries, rose 12 cents to $49.30. It fell $1.23 to close at $49.18 in London.
CURRENCIES: The dollar fell to 124.37 yen from 125.18 yen in the previous trading session. The euro rose to $1.1118 from $1.1047.
