The selloff in emerging-market assets and commodities deepened, spurring declines in currencies from Russia's rouble to Australia's dollar and sending a measure of developing-nation stocks to a four-year low. The pound strengthened after UK inflation unexpectedly quickened.
Oil and copper led commodities lower speculation the global fuel glut will persist and China's economy will face further headwinds. Shares in Shanghai dropped the most in three weeks, while prospects for the Federal Reserve to raise interest rates also sapped demand for riskier assets. Thailand's baht fell to a six-year low after Monday's deadly bomb explosion in the capital.
"There is a lack of positive catalysts for emerging markets," Martial Godet, the head of emerging-market equities and derivatives strategy at BNP Paribas SA in Paris, said by e-mail. "Dovish Fed comments and a rate hike in December rather than September could help stabilise the situation, especially on the currency side." The MSCI Emerging Markets Index dropped 0.7 per cent at 6:33 am in New York. Russia's rouble weakened for a fourth day and the Aussie retreated the most among its 16 major peers. The pound climbed 0.7 per cent to $1.5701 and gilts fell. Futures signaled US stocks will fall for the first time in three days. Treasuries were little changed, with the yield on 10-year notes at 2.16 per cent. Chinese stocks tumbled, with the Shanghai Composite Index losing 6.2 per cent.
The most in three weeks, as traders reduced stimulus bets and speculated the government will pare back efforts to prop up equities after data showed home prices rose. The Hang Seng China Enterprises Index dropped 1.5 percent, erasing a gain of as much as 1.3 percent.
China devaluation
The declines come a week after China's first major devaluation since 1994 surprised global investors and fueled concern authorities are struggling to combat a slowdown in the world's second-largest economy.
"Since China devalued the currency last week, investors have become more concerned about the growth outlook for emerging markets," Michael Wang, a London-based strategist at Amiya Capital LLP, who recommends selling emerging-market stocks, said by e-mail. "We need to get the first Fed rate hike out of the way. We also more evidence that the near-term outlook for China's economy is stabilising."
Saudi Arabian shares fell for a sixth day, with the Tadawul All Share Index 2.4 per cent sliding to the lowest since January, after the International Monetary Fund said the drop in oil prices will force spending cuts and curtail economic expansion.
'Thailand vulnerable'
Thai stocks dropped the most since January 2014, with the benchmark gauge falling 2.8 per cent. The baht slid 0.7 per cent to 35.620 versus the dollar in Bangkok. A blast on Monday killed at least 20 people in city's central shopping district, putting the nation's tourism sector at risk.
"Thailand is vulnerable right now, as economic growth and corporate earnings are weak," said Andrew Stotz, chief executive officer of Bangkok-based A Stotz Investment Research and former head of research for Thailand at CLSA Ltd.
The rouble slid 0.4 per cent to 65.7970 versus the dollar and Malaysia's ringgit lost 0.4 per cent. Among developed-nation currencies, the Aussie fell 0.4 per cent to 73.42 US cents, the Norwegian krone weakened 0.3 per cent to 8.2376 per dollar while the Canadian dollar depreciated 0.3 per cent against its US peer to C$1.3112.
The Bloomberg Commodity Index fell as much as 0.5 per cent to the lowest since February 2002. The gauge of 22 raw materials declined for a sixth day in the longest run of losses in more than a year.
Commodities fall
Oil traded near the lowest in six years in New York on speculation the global glut that drove prices into a bear market will be prolonged. West Texas Intermediate crude oil slipped 0.8 percent to $41.55 a barrel.
Copper dropped as much as 1.9 percent to $5,018 a metric ton on the London Metal Exchange, the lowest since 2009.
Aluminum also reached a six-year low, while lead, nickel and zinc also retreated.
Gold for immediate delivery was little changed at $1,118.78 an ounce. Silver fell 0.8 percent to $15.2125 an ounce.
Sterling strengthened against all 31 of its major peers as the Office for National Statistics said annual inflation quickened to 0.1 percent in July. The yield on 10-year gilts jumped four basis points to 1.86 percent.
Futures on the Standard & Poor's 500 Index fell 0.1 percent. Wal-Mart Stores Inc. and Home Depot Inc. are among four S&P 500 companies reporting earnings on Tuesday and report will probably show housing starts increased in July less than in the previous month, according to a Bloomberg survey of economists.
European Stocks
The Stoxx Europe 600 Index was little changed, with gains in technology and health-care stocks offsetting declines in basis-resources and energy producers.
John Wood Group Plc fell 2.2 percent after the oil-services contractor said conditions remain challenging. German utility RWE AG lost 2 percent after Societe Generale SA recommended selling the stock.
Wirecard AG jumped 6.1 percent after reporting an increase in profit. Jyske Bank A/S advanced 3.8 percent after saying earnings were better than expected.
The cost of insuring corporate debt held near the highest in about five weeks. The Markit iTraxx Europe Index, which tracks credit-default swaps on investment-grade companies, was little changed at 67 basis points. The sub-investment grade Markit iTraxx Europe Crossover Index was little changed at 311 basis points.
