European markets fall as concerns over China's yuan devaluation fuel concerns of a global currency war. Sara Hemrajani reports.
China's yuan sinks for a second day - and that's making European markets jittery. The country's central bank has once again cut the currency's guiding rate, though it says this isn't the start of a sustained depreciation. Shares in major exporters to the Asian economy are plummeting as their goods become even more expensive for Chinese consumers - and on fears of less demand in the future. Auto maker Daimler is down some 3 per cent. And so is luxury giant LVMH. London nickel, copper and aluminium dropped to six year lows. Glencore fell 5 per cent in morning trade, while BHP and Rio Tinto fell around 3 per cent. The yuan devaluation is also raising the spectre of a currency war -- But IG's Chris Beauchamp says China could argue otherwise. SOUNDBITE: Chris Beauchamp, IG market analyst, saying (English): "The PBOC might argue that we have been in one for quite a while with the Fed having pushed the dollar down for the past 5 years thanks to rounds of QE. And now the ECB doing the same thing. So China, yes it's getting the blame for this perhaps most blatant move but it is maybe a currency war that has been underway for quite some time." Against the backdrop of struggling global growth, a race to weaken national currencies could put further dampeners on recovery efforts. SOUNDBITE: Chris Beauchamp, IG market analyst, saying (English): "You could see a sort of reining back in investment and expenditure by firms and you get this negative feedback loop that could do quite a bit of damage I think to the global economy that still isn't at full health." China acknowledges that yuan depreciation will help stimulate exports. The question is at what cost to its trading partners.