Investing.com - Asian shares fell on Tuesday with investors still nervous about the pace of China's economic growth and what that may mean for global markets.
The Nikkei 225 slumped 2.12% while the S&P/ASX 200 dipped 0.28% and the Shnaghai Composite eased 0.26% in volatile trade after a weaker yuan fixing.
The yuan's central parity rate against the U.S. dollar was set at 6.5628 Tuesday, slightly weaker than Monday's 6.5626 level set by the People's Bank of China.
As well, China's main economic body, the NDRC, said it expects that GDP rose around 7% in 2015, in line with target.
On Monday, the People's Bank of China (PBOC) attempted to soothe markets by setting the daily fix for the yuan against the dollar dramatically higher in comparison with its level at last week's close. While the Chinese currency surged against the dollar in offshore trade, Chinese equities continued to plunge – extending severe losses from the opening week of the year.
The PBOC devalued the yuan 1.6% last week, after lowering it by nearly 5% against the dollar in 2015 in an effort to stimulate its economy by boosting exports. Weak manufacturing and service sector data for December exacerbated fears that the world's second-largest economy finished last year with the slowest GDP growth in nearly a quarter-century.
Investors await the release of China trade data on Wednesday for further indications on the strength of the Chinese economy. The monthly trade report for December is expected to show that the country's trade surplus narrowed to $53.0 billion from $54.1 billion in November. In addition, Chinese exports last month are expected to slump 8.0% on a yearly basis, while economists expect imports to plummet 11.5%, after falling nearly 9% a month earlier.
On July 21, 2005, China freed the yuan from its longstanding peg to the dollar in favor of a managed float with reference to a basket of currencies. From March 17, 2014, the yuan is allowed to move 2% either side of the daily fixing against the dollar.
Overnight, U.S. stocks were mixed on Monday amid a last-minute rally by the Dow Jones Industrial Average, even as crude futures plunged to fresh 12-year lows pulling down energy stocks on the major indices.
U.S. crude futures tumbled more than 5% in Monday's session, at one point dipping below $31 a barrel, as longstanding concerns related to slowing economic growth in China continued to fester. With the dramatic one-day fall, crude futures extended a seven-day losing streak dating back to the start of the year. It coincided with an investor note by Morgan Stanley (N:N:MS), which warned that crude prices could stumble even further if the yuan continues to be devalued.
The Dow Jones Industrial Average gained 52.12 or 0.32% to 16,398.57, while the NASDAQ Composite index fell 5.64 or 0.12% to 4,637.99, due in part to severe losses among biotech stocks. The NASDAQ closed lower for the eighth consecutive session. The S&P 500 Composite index, meanwhile, added 1.64 or 0.09% to 1,923.67, as six of 10 sectors closed in the green. Stocks in the Consumer Goods, Telecommunications and Utilities sectors led, each gaining more than 0.50% on the session.
The major indices are coming off their worst annual start in 25 years, as a slowdown in China and a continual downturn in energy prices has weighed on equity markets worldwide.