* MSCI All World index hits 3-month low
* China again guides yuan lower and risk sentiment suffers
* China stocks trigger circuit breaker for second time this
week
* Brent hits 11 1/2-year low as China woes add to glut
concerns
* Yen, German bonds gains on flight to safety
By Jemima Kelly
LONDON, Jan 7 (Reuters) - Global shares tumbled for a sixth
day on Thursday and oil prices slid to levels not seen since the
early 2000s, after China guided the yuan lower and Shanghai
shares tumbled by 7 percent, igniting fears of competitive
devaluations across Asia.
Less than half an hour after the market opened, Chinese
stock trading was suspended for a second time this week
Brent crude prices skidded over 5 percent to an
almost-12-year-low of $32.16 LCOc1 , with worries over weaker
demand from China adding to a persistent drag on prices caused
by oversupply and near-record output levels. O/R
European stock markets followed Asia lower, with the
pan-European FTSEurofirst 300 index .FTEU3 down 2.3 percent
and the euro zone's blue-chip Euro STOXX .STOXX50E index
falling 2.5 percent.
MCCI's 46-country All World index .WORLD fell 1 percent to
hit a three-month low, the sixth straight day of losses. The
benchmark emerging stock index .MSCIEF slid 2.5 percent to a 6
1/2-year low as investors dumped risky assets. .MSCIEF
EMRG/FRX
"It's looking pretty ugly," said hedge fund manager and
chief investment officer Andreas Clenow at ACIES Asset
Management in Zurich. "We've been scaling down equity positions.
It's time to take a step back to re-evaluate the situation."
The People's Bank of China (PBOC) set the yuan midpoint rate
CNY=SAEC at 6.5646 per dollar, 0.5 percent weaker than the
previous day's fix. That was the biggest decline between daily
fixings since August and the eighth day in row the PBOC had set
a lower guidance rate.
Spot yuan CNY=CFXS fell to 6.5956 to the dollar, its
weakest since February 2011. Offshore yuan rates hit a record
low of 6.7600 to the dollar CNH= , before erasing its losses
after suspected intervention by authorities. CNY/
Other regional currencies followed the yuan down as markets
began to worry about competitive currency devaluations from
trading partners. Singapore's dollar SGD= hit a six-year low,
the South Korean won KRW= touched a four-month low, and the
Malaysian ringgit MYR= slumped to a three-month trough.
Investors fear China's economy is even weaker than had been
imagined, with Beijing, in a bid to help exporters, allowing the
yuan's depreciation to accelerate.
"The lower yuan fixing probably signifies greater risks to
the Chinese economy than we know of, leading to risk-off
trades," said Jeremy Stretch, head of currency strategy at CIBC
World Markets.
FLIGHT TO SAFETY
North Korea's announcement on Wednesday that it had
successfully conducted a test of a hydrogen nuclear device added
to a growing list of geopolitical worries for investors.
"Geopolitical tensions stemming from Saudi-Iran tensions and
North Korea's nuclear test had already heightened the 'risk off'
mood," said Takashi Hiroki, chief strategist at Monex Securities
in Tokyo. "Resurfacing China risk was the extra psychological
blow to the markets that led to the selloff in equities."
As investors fled to safety, the yen rose about 1 percent to
117.615 per dollar JPY= , its strongest in 4 1/2 years FRX/ .
Top-rated German bonds, which are also considered a safe
haven, benefitted, too. Ten-year yields dropped below 0.50
percent for the first time in over a month. GVD/EUR
Earlier, MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS dropped 2 percent to its lowest
since late September. Japan's Nikkei .N225 shed 2.2 percent.
New rules Chinese authorities introduced this week that
restrict selling by large shareholders did not go down well with
investors and provided little tonic to jittery markets.
"This is crazy. Chinese regulators set off on this path in
July and they cannot get out of it. They have ruined whatever
hope investors still had in the market," said Alberto
Forchielli, founder of Mandarin Capital Partners in Hong Kong.