Global Stocks Continue to Fall after Yuan Devaluation

By Christopher Whittall 

Global stocks headed sharply lower for a second straight day Wednesday, following China's devaluation of the yuan amid a slowdown in the world's second-largest economy.

The pan-European Stoxx Europe 600 index fell 2.0% in early trade, dragged down by exporters and commodity-linked companies that are sensitive to demand from China. Germany's exporter-heavy DAX index fell 2.3%.

Shares in luxury goods firms Burberry Group PLC and LVMH Moët Hennessy Louis Vuitton were down were down 3.6% and 3.5%, respectively. Car maker Peugeot SA fell 4.3% and Daimler AG was down 3.8%. Mining firm Glencore PLC was down 5.0% and steelmaker ArcelorMittal SA fell 3.3%.

A weaker yuan could hurt the competitiveness of firms outside China by making their goods and services relatively more expensive. Companies that sell goods in China could find revenues generated in yuan are worth less in their home currency.

The Chinese yuan fell 1.6% against the U.S. dollar Wednesday after the People's Bank of China set its daily reference rate to the buck down 1.6% from Tuesday's rate.

The move followed the central bank weakening the yuan by almost 2% Tuesday.

Stocks in Asia were down across the board, while local currencies weakened against the dollar for the second day in a row.

Hong Kong's Hang Seng index fell 2.4%, Japan's Nikkei 225 index dropped 1.6% and China's Shanghai Composite Index was down 1.1%.

The euro rose 0.5% against the U.S. dollar to $1.1094.

Brent crude oil was down 0.2% at $49.06 a barrel. Gold was up 0.8% at $1,116.30 a troy ounce.

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