NEW YORK (Reuters) - Stocks across the world fell for a fifth consecutive 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.
Crude futures tumbled further as a row between Saudi Arabia and Iran made any cooperation between major exporters to cut output even more unlikely. Both Brent and WTI fell below $35 a barrel.
Stocks opened more than 1 percent lower on Wall Street despite strong U.S. job market data, tracking declines in European markets and most of Asia, while safe-havens such as the Japanese yen, U.S. and German bonds, and gold strengthened.
Traders and economists fear the move from China to further depreciate the yuan 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.
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.
"It's scary when you see the second largest economy on the planet seemingly melting down," said Brad McMillan, chief investment officer at Commonwealth Financial in Waltham, Massachusetts.
"There are very legitimate reasons for concerns," he said, citing the Saudi-Iran row and the report of North Korea's hydrogen bomb test. "You could argue the market response has been very rational."
The Dow Jones industrial average fell 206.23 points, or 1.2 percent, to 16,952.43, the S&P 500 lost 21.13 points, or 1.05 percent, to 1,995.58 and the Nasdaq Composite dropped 36.91 points, or 0.75 percent, to 4,854.53
MSCI's World index of developed market stocks hit a 3-month low and emerging market shares were at their lowest since mid 2009.
China's blue chip shares bucked the global trend with the CSI300 index closing up 1.75 percent and the Shanghai Composite up 2.3 percent. State Chinese media reported that a selling ban brought in to help stop a market crash last summer would remain in place until the government publishes new rules.
In Europe the FTSEurofirst 300 fell 1.4 percent.
The U.S. dollar touched a near three-month low of 118.22 yen while the euro was little changed at $1.075.
The U.S. Treasury benchmark yield hit its lowest in more than two weeks on safe-haven demand and on signs that a lack of inflationary pressures could slow the pace of Federal Reserve interest rate hikes this year.
U.S. 10-year Treasury notes were last up 17/32 in price to yield 2.1896 percent, from a yield of 2.25 percent late Tuesday.
Spot gold rose more than 1 percent to $$1,89.30 an ounce.
Brent 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.
"Shale production and increasing capacity from countries like Russia who need to protect revenue, combined with expectations of further Iranian supply, mean actual production as well as expectations of future production are rising," said Michael Hewson, chief market analyst at CMC Markets.
Global benchmark Brent crude fell more than 5 percent to $34.56 a barrel and U.S. crude futures were down 4.5 percent at $34.37.
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.
Additional reporting by Simon Falush in London and Chuck Mikolajczak in New York; Editing by Nick Zieminski