World stocks fell for a fifth day on Wednesday as China fueled fears about its economy by allowing the yuan to weaken further and a nuclear test by North Korea added to a growing list of geopolitical worries.
European markets followed Asia into the red, with Britain's FTSE, Germany's DAX and France's CAC all 0.7 percent lower in early trading, to leave MSCI's 46-country All World index down 0.3 percent.
Souring sentiment toward riskier assets in turn lifted safe-havens such as the Japanese yen, US Treasuries, German Bunds and gold, while the pressure was firmly back on oil as both Brent and WTI fell $2 to near $35.50 a barrel.
"The moves in yuan have been very interesting," Societe Generale FX strategist Alvin Tan said.
"The CNH (offshore yuan) is down 2 percent since New Year's Eve … if they allow this to continue this has very serious repercussions for global markets."
Traders and economists fear the yuan's depreciation may mean the world's second-biggest economy is even weaker than had been expected and that it could trigger another wave of competitive devaluations around Asia and in other key economies.
The People's Bank of China surprised on Wednesday by setting the yuan's official midpoint rate at its weakest level in 4-1/2 years at 6.5314 per dollar. That triggered further selling in the 'offshore' yuan, which slumped to 6.6956 per dollar, its lowest since trading began in 2010.
There was more gloomy Chinese economic data to digest, too, with a PMI survey showing services sector activity expanded at its slowest rate in 17 months in December.
State Chinese media meanwhile reported that a selling ban on major shareholders brought in to help arrest a market crash last summer would remain in place until the government publishes new rules on such disposals.
That helped drive China's blue chip shares sharply higher, with the CSI300 index closing up 1.75 percent and the Shanghai Composite finishing 2.3 percent better off.
They were among very few risers, however, as North Korea's announcement that it had successfully conducted a test of a hydrogen nuclear device added to geopolitical worries stirred by a row between Saudi Arabia and Iran.
South Korea's KOSPI and the won both fell and Japan's Nikkei extended losses to close down 1 percent.
In Europe, a 2.5 percent fall in mining and natural resource stocks left the FTSEurofirst 300 0.7 percent lower at 1,400.
Another PMI showed growth in Britain's dominant services sector slowed slightly in December, suggesting one of Europe's best performing economies over the last couple of years expanded only modestly in the final part of 2015.
Oil pressure
The mood was similarly cautious in currency and bond markets, with the yuan's accelerated fall dragging down other emerging currencies like the Malaysian ringgit and Thai baht.
The dollar touched a near three-month low of 118.35 yen while euro slid to a nine-month trough of 127.465 yen and dipped to $1.0720 as a top European Central Bank policymaker reiterated its willingness to keep printing money.
That also helped push yields on German 10-year Bunds to their lowest since the ECB's last meeting in December, which delivered less in terms of policy stimulus then most traders had been expecting. The 10-year US Treasury yield fell by about 3 basis points to 2.22 percent.
"European government bond markets are enjoying a (balanced) environment, with sliding inflation expectations augmenting the lingering emerging market concerns," Commerzbank rate strategist Michael Leister said.
Adding to the risk-off mood, crude oil prices hit new 11-year lows as the face-off between Saudi Arabia and Iran over Riyadh's execution of a Shi'ite cleric was seen extinguishing any chance of major producers cooperating to cut production.
Global benchmark Brent crude was trading at $35.75 a barrel at 0930 GMT, down 67 cents or 1.9 percent from the previous day's settlement and the lowest since 2004.
US crude futures were down 46 cents at $35.51 per barrel after slipping 79 cents on Tuesday.
