By Christopher Whittall
China's devaluation of its currency sent global stocks tumbling
lower on Tuesday, with shares of companies that export to China or
compete with Chinese rivals hit especially hard.
A weaker yuan could hurt the competitiveness of firms outside
China by making their goods and services relatively more expensive,
while companies that generate sales in China could find revenue and
profit generated in yuan are worth less in their home currency.
The pan-European Stoxx Europe 600 index was down 1.2% early
afternoon.
U.S. stock futures indicated a 0.8% opening decline for the
S&P 500. Changes in futures aren't necessarily reflected in
market moves after the opening bell.
"Worries about what this might mean for the competitiveness of
the West versus the East" are driving the selloff, said Chris
Jeffery, an asset-allocation strategist at Legal & General
Investment Management.
Luxury-goods firms, car makers and mining companies, which are
highly sensitive to Chinese demand, came under the most intense
pressure.
In Europe, shares in LVMH Moët Hennessy Louis Vuitton SE and
Gucci-owner Kering SA fell more than 3%. Premium auto makers BMW AG
and Daimler AG both lost more than 4%, dragging Germany's
export-heavy DAX index to a 2.0% decline.
Shares in BHP Billiton PLC were down 3.2% and Rio Tinto PLC lost
2.0%.
More broadly, the currency devaluation marked the latest round
in Beijing's efforts to prop up a slowing economy, further fanning
concerns over the effect on global growth.
"With regard to its impact on growth, it feels at best like this
is a zero-sum game: what is good for growth in China is
unfortunately bad for everybody else," said Bill McQuaker, co-head
of multiasset at Henderson Global Investors, which oversees GBP82
billion in assets.
Most Asian bourses fell and currencies sank. Japan's Nikkei 225
index fell 0.4%. The Shanghai Composite Index was flat.
"The market is still trying to work out if this is a one-off
move or the start of something more significant," said Talib
Sheikh, a multiasset fund manager at J.P. Morgan Asset Management,
which oversees $1.8 trillion in assets.
"We think the risks are they'll have to engage in further
measures" to weaken the currency, he added.
Athens stocks bucked the trend after progress toward a third
bailout for Greece.
The Athex Composite index was 0.9% higher. Greek stocks saw some
of the largest gains in Europe, with National Bank of Greece SA up
5.8%.
Greece and its international creditors reached an agreement in
principle to provide the country with a bailout worth as much as
EUR86 billion ($94.4 billion), but some details remained
unresolved, according to a spokeswoman for the European Commission
and a Greek government official.
In currency markets, the euro was up 0.4% against the U.S.
dollar at $1.1066. The Japanese yen fell 0.3% against the buck.
Brent crude oil fell 1.6% to $49.59 a barrel. Gold rose 0.4% to
$1,108.40 a troy ounce.
Tommy Stubbington contributed to this article.
Write to Christopher Whittall at
christopher.whittall@wsj.com