Concerns over China, news of a possible nuclear test in North Korea and a steep fall in oil prices combined to send global stocks lower on yesterday, extending the shaky start to this year.

Futures pointed to a 1.4 per cent opening loss for the S&P 500. Changes in futures do not necessarily reflect market moves after the opening bell.

The Stoxx Europe 600 was down 1.2 per cent late morning, led lower by the resources sector as Brent crude fell to an 11-year low and the price of copper declined.

Investors shed risky assets and bought into haven investments, spooked by lackluster Chinese services data released yesterday. Those concerns were a large factor in oil’s decline, as mounting concerns over China’s economy spread across markets.

“The slowdown in China and its effect more broadly on emerging markets will still be a major theme in the global equity market this year,” said David Lafferty, chief market strategist at Natixis Global Asset Management

The Shanghai Composite Index ended up 2.3 per cent yesterday, but its near 7 per cent plunge at the start of the week has left investors on edge.

China’s central bank has intervened in markets to soothe fears and prop up the country’s economy. Yesterday, the bank fixed the yuan at a five-year low against the U.S. dollar. Regulators also tried to reassure markets that a ban on selling stocks by large stakeholders due to expire on Friday will not have the catastrophic effect that many in the market fear.

For European equities “China is the only story,” said Tristan Abet, investment strategist at Louis Capital Markets. “If you’re a bear on China and the yuan, you can’t be bullish on Europe,” he said.

Elsewhere in Asian trade, Australia’s S&P ASX 200 fell 1.2 per cent, while Hong Kong’s Hang Seng Index fell 1 per cent, deepening a week of losses for both indexes.
Japan’s Nikkei Stock Average closed down 1 per cent.

Adding to the market’s frayed nerves, North Korea said on Wednesday that it successfully staged its first test of a more powerful form of nuclear weapon.

Among traditional safe haven assets, gold was up 0.5 per cent at $1,083.30 a troy ounce, and the yen neared a three-month high against the dollar.

Investors also moved into the relative safety of government debt. Ten-year U.S. Treasury yields were 0.04 percentage point lower at 2.196 per cent and 10-year German yields fell by a similar amount to 0.504 per cent. Yields fall as prices rise.

In commodities, Brent crude fell 3.6 per cent to $35.10 a barrel. The fall is ahead of weekly U.S. crude inventory and production data later in the day. In metals, copper was down 0.4 per cent at $4625 a metric ton in London trade.

Commodity investors also continue to weigh a strong dollar, recent tensions between Saudi Arabia and Iran, and the latest manufacturing releases from China and the U.S.

Commodities-linked stocks were helping to lead Europe lower. European energy stocks were last down 1.4 per cent, while the basic materials sector was down 2.8 per cent. Shares in BHP Billiton were down 4.8% and Rio Tinto PLC lost 4.1 per cent.

The euro was down 0.1 per cent against the dollar at $1.0729 after the eurozone composite purchasing managers index was revised up. The dollar was last down 0.6 per cent against the yen at ¥118.4380.