* MSCI world share index down for 5th day
* Oil under $35 a barrel for first time since 2004
* Weaker yuan, soft China survey sour risk sentiment
* North Korea nuclear test hits won, South Korea's KOSPI
* Chinese shares shored up on report of supportive measures
* Reports of Apple cutting iPhone production sparks nerves
By Marc Jones
LONDON, Jan 6 (Reuters) - World stocks fell for a fifth day
on Wednesday as China fuelled 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 .FTSE , Germany's DAX .GDAXI and France's CAC .FCHI
all 1.5 percent lower ahead of what was expected to be an
equally rough start for Wall Street. ESc1
MSCI's 46-country All World index .WORLD was flirting with
a 3-month low and emerging market shares .MSCIEF were at their
lowest in more than six months. EMRG/FRX
Souring sentiment toward riskier assets in turn lifted
safe-havens such as the Japanese yen JPY= , U.S. Treasuries,
German Bunds and gold XAU= , while the pressure was firmly back
on oil as both Brent and WTI fell under $35 a barrel. O/R
"There is a very strong sense of risk-off again," said John
Hardy, head of FX strategy at Saxo Bank also flagging reports
that Apple AAPL.O , one of the world's bellwether tech firms,
was set to cut iPhone production by almost a third.
"It's also about China," Hardy said. "The pace of the
currency weakness, is this a sign that they are losing control a
bit?"
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 CNY=SAEC at its weakest
level in 4-1/2 years at 6.5314 per dollar. That triggered
further selling in the 'offshore' yuan CNH=D3 , which slumped
to 6.6956 per dollar, its lowest since trading began in 2010.
There was more gloomy economic data to digest, too, with a
PMI survey showing China's 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 buck the global
direction, with the CSI300 index .CSI300 closing up 1.75
percent and the Shanghai Composite .SSEC 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 .KS11 and the won KRW= both fell and
Japan's Nikkei .N225 extended losses to close down 1 percent.
In Europe, a 3.5 percent fall in mining and natural resource
stocks .SXPP left the FTSEurofirst 300 .FTEU3 1.5 percent
lower at 1,389 points, its lowest since mid-December.
OIL PRESSURE
The mood was similarly cautious in currency and bond
markets, with the yuan's CNH=D3 accelerated fall dragging down
other emerging currencies like the Malaysian ringgit MYR= and
Thai baht THB= and the Aussie AUD= and Kiwi NZD= dollars.
The U.S. dollar touched a near three-month low of 118.35 yen
JPY= while euro slid to a nine-month trough of 127.38 yen
EURJPY= and dipped to $1.0720 at one stage 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 U.S. Treasury yield US10YT=RR fell
by about 5 basis points to 2.19 percent. GVD/EUR
"European government bond markets are enjoying a (balanced)
environment, with sliding inflation expectations augmenting the
lingering emerging market concerns," Commerzbank (DE:CBKG) 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 LCOc1 was trading at $34.93 a
barrel at 12300 GMT, down $1.50 or 1.5 percent from the previous
day's settlement and the lowest since 2004. O/R
U.S. crude futures CLc1 were down $1 at $34.95 per barrel
after slipping 79 cents on Tuesday with China-attuned industrial
metal copper CMCU3 down at a 2-week low of $4,595 a tonne.
The talk of Apple slashing iPhone production pushed its
shares down 2.44 percent to $102.71 in premarket trading. .N
Investors will also keep an eye out for a host of U.S. data
scheduled to be released later. The Federal Reserve issues
minutes from its Dec. 15-16 meeting, where it raised interest
rates for the first time in nearly a decade.
The ADP National Employment Report for December, is likely
to show an addition of 192,000 jobs. The data, expected at 8:15
a.m. ET (1315 GMT), comes ahead of a more comprehensive non-farm
payroll report on Friday.