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 A broad measure of Asian stocks fell to its lowest in two years and
U.S. stock futures pointed to a lower open on Wall Street.
"The late rout in Chinese stocks appears to have knocked sentiment
in Europe this morning. The commodity sell-off is also weighing on
sentiment today," said Craig Erlam, senior market analyst at Oanda
in London.
Britain's FTSE 100 fell 0.3 percent. The pan-European FTSEurofirst
index of 300 leading shares eked out gains of 0.2 percent, having
been in negative territory much of the morning. Germany's fell
0.1 percent and France's CAC 40 was down a quarter of a percent.
Earlier, China's main Shanghai Composite and Shenzhen 300 indices
both lost 6.2 percent as investors bet that demand in China will
cool further.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 1
percent to its lowest since August 2013. Japan's Nikkei dipped 0.3
percent.
Thai shares <.SET> hit a 1-1/2-year low and the baht a six-year low
after a bomb blast in Bangkok on Monday killed 19 people, including
three foreign tourists.
The worries over China came on a day when trade in the yuan was
relatively calm after Beijing fixed the currency's exchange rate
marginally higher for the third successive session.
China's central bank on Tuesday set the yuan's midpoint <CNY=SAEC>
near Monday's closing price at 6.3966 per dollar. In the spot
market, the yuan closed flat at 6.3938 <CNY=CFXS>.
Emerging market currencies were weak across the board. In Turkey,
where Prime Minister Ahmet Davutoglu was set to give up trying to
form a government, the lira hit a record low <TRY=>, and the South
African rand slid to a 14-year low <ZAR=> against a firm dollar.
"The weakness of sentiment in emerging market FX is striking,"
Societe Generale currency strategists said in a note to clients on
Tuesday.
"Fear of a resumption of significant capital outflows if the Fed
does raise rates next month as well as fear of further yuan weakness
and concern about the sluggish pace of global growth are all
delivering persistent broad-based weakness."
MSCI's main index of emerging market shares fell 0.8 percent.
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In developed markets, the euro slipped 0.2 percent to $1.1060 and
the yen was flat at 124.30 yen.
The British pound hit a seven-week high above $1.57 after UK
inflation came in higher than forecast.
Investors will look to U.S. inflation data and minutes of the latest
Federal Reserve monetary policy meeting, both being issued on
Wednesday, as they ponder when the Fed will begin raising interest
rates.
Markets are still not fully convinced the Fed will raise rates in
September, but most investors are betting a rate hike will occur by
the end of year. The yield on U.S. 10-year Treasuries was 1 basis
point higher at 2.16 percent .
Commodity prices remained under pressure from worries about growth
slowing in China. Brent oil futures fell 0.2 percent to $48.64 per
barrel, edging closer to a six-month intraday low of $48.24 touched
last week.
U.S. crude futures fell 0.4 percent to $41.79, having hit a
6-1/2-year low on Friday.
Copper futures touched a fresh six-year low at $5,012 a tonne before
recovering to $5,030, down 1.7 percent.
(Additional reporting by Shinichi Saoshiro and Lisa Twaronite in
Tokyo and Nigel Stephenson in London; Editing by Kevin Liffey)
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