China trading suspended; Asian stocks, currencies, oil sink on latest yuan fixing cut

[WELLINGTON] Trading was halted for 15 minutes on China's stock markets on Thursday morning after shares fell more than five per cent, triggering an automatic "circuit breaker".

The benchmark Shanghai Composite Index slumped 5.45 per cent, or 183.14 points, to 3,178.70. The Shenzhen Composite Index, which tracks stocks on China's second exchange, tumbled 6.77 per cent, or 144.38 points, to 1,989.58.

Asian stocks and currencies also extended a global rout while oil erased gains after China weakened the yuan's reference rate by the most since August, when a shock devaluation roiled global markets.

The MSCI Asia-Pacific Index of shares sank to a three-month low and the Bloomberg-JPMorgan Asia Dollar Index dropped to its weakest level since April 2009. US crude erased gains, trading near US$34 a barrel after a 5.6 per cent slide on Wednesday. The yen strengthened and 10-year Treasuries rallied.

Chinese policy makers' growing tolerance for a weaker yuan is being seen as a sign that they are struggling to stem a slowdown. Crude's slump is also unnerving investors, heightening fears over disinflation and the ability of central banks to meet their monetary policy goals.

The World Bank on Wednesday cut its global growth forecasts for this year and 2017, citing concerns over China's economy and its impact on commodities that have been at the forefront of traders' minds since 2016 got under way."It's been hard to catch a breath in 2016 and traders haven't really known which way to turn," Chris Weston, chief market strategist in Melbourne at IG Ltd, wrote in an e-mail to clients. "For risk assets to stabilize and sentiment to turn around, we are going to need a stable or even positive move in the Chinese currency. It's clear that the market is becoming increasingly concerned by the global inflation outlook."

BLOOMBERG