European exchanges were down sharply, with Germany’s Dax and France’s Cac 40 each lower by more than three per cent. In New York the Dow Jones Industrial Average was down more than 200 points in early trading.
On currency markets, traders were mulling official UK figures that showed annual pay growth in the three months to June had slowed to 2.4 per cent, down from 3.2 per cent in the previous month’s figures.
A slowdown in wage rises would push back expectations for the timing of an interest rate rise, putting pressure on sterling.
However the figures from the Office for National Statistics showed that regular pay growth excluding bonuses was unchanged at 2.8 per cent.
The pound fell a cent against the euro to just under 1.40, but was up a cent against the US dollar at just over 1.56.
World markets were dominated by reaction to developments in China.
Beijing is allowing its currency to slide after a raft of weak economic data including trade figures. A weaker yuan helps its exports by making them cheaper overseas but hurts non-Chinese companies trying to sell into the world’s second biggest economy.
Burberry was one of the main losers in the previous session following the initial devaluation, with the stock down four per cent. The luxury fashion brand was down again today as the currency fell further.
The group’s business in China accounts for a large chunk of its revenues. Shares fell three per cent, or 54p, to 1482p. However, Mulberry, another luxury brand, lifted 5.5p to 920p, after falling earlier in the session.
Randgold Resources was the main beneficiary of the turmoil in London’s top-flight, with the miner gaining on the strength of gold, seen as a safe haven investment. Shares rose more than five per cent, or 214p to 4166p.
Consumer goods giant Reckitt Benckiser was among the fallers after the UK’s Competition and Markets Authority (CMA) ruled that it would have to license sales of the K-Y lubricant brand to a rival.
Durex owner Reckitt is buying K-Y from US giant Johnson & Johnson for a reported £260 million.
But the CMA ruled that this could result in a substantial lessening in competition resulting in higher prices, with Durex and K-Y together holding three quarters of market share in supermarkets and pharmacy chains. Reckitt shares fell almost three per cent, or 170p to 5954p.
The biggest risers on the FTSE 100 Index were Randgold Resources up 214p at 4166p, Babcock International up 15p at 998p, Fresnillo up 8.5p at 661.5p and G4S up 3.2p at 269.9p.
The biggest fallers on the FTSE 100 Index were Glencore down 10.8p at 180.2p, ARM Holdings 43.5p at 916p, International Airlines Group down 24p at 525.5p and Unilever down 124p at 2788p.
