(Recasts, updates prices, adds quotes)
* European stocks surrender early gains
* Intervention steadies Chinese markets
* Euro zone inflation weaker than expected
* Concerns about economy, political risk mount
By Jamie McGeever
LONDON, Jan 5 (Reuters) - World stocks fell again on Tuesday
after their worst first-day performance in years, extending
losses as relief at intervention by China to steady its markets
quickly evaporated in the face of mounting concerns about the
global economy.
European stocks moved back into the red after opening up as
much as 1 percent, and U.S. futures pointed to a fall of 0.6
percent on Wall Street ESc1 .
Despite a cash injection of around $20 billion, Chinese
shares listed in Shanghai and Shenzen .SSEC .CSIO300 ended
no better than little changed on Tuesday and the yuan fell to a
new 4-1/2-year low in offshore trade.
Sanjiv Shah, chief investment officer at Sun Global
Investments, said Beijing's latest attempts to steady its equity
and currency markets reflected the depth of the concerns
rippling across world markets.
"The Chinese government is trying to manage the market moves
and reduce volatility. However, the trend of slowing growth as
manufacturing continues to perform poorly is clearly worrying
traders," Shah said.
Panic selling, mostly by China's army of small retail
investors, sent the country's shares diving 7 percent on Monday,
the first trading day of 2016, That set off a worldwide
reaction, pushing MSCI's global index 2 percent lower
.MIWD00000PUS .
The global index recovered early on Tuesday but by
midsession in Europe was back down 0.2 percent. The FTSE
pan-European index of 300 leading shares was also down 0.2
percent at 1,398 points, extending Monday's 2.5 percent fall.
German and French stocks were down 0.6 percent after opening
around 1 percent higher .GDAXI .FCHI while Britain's FTSE
100 index was down 0.1 percent .FTSE .
Emerging equities, having posted their biggest one-day fall
since August, stayed close to those lows .MSCIEF .
EURO FALLS
Monday marked the worst opening day of a year for stocks in
many years. In the case of the S&P 500 it was since 2001 and the
Dow Jones Industrials at one stage was on track for its biggest
opening day fall since 1932 before clawing back some ground.
Many analysts predicted that investors would view any bounce
on Tuesday as a chance to sell, given the economic gloom across
much of the world, weak commodity prices and the escalation of
political risk in the Middle East, where Iran and Saudi Arabia
are facing off over Riyadh's execution of a Shi'ite cleric.
"The price action reminds investors that the world is more
connected than ever; volatility is likely here to stay, and
liquidity may suffer if investor uncertainty worsens," analysts
at Citi said in a note.
Manufacturing surveys across the globe this week showed
activity to be anaemic, with China and the United States both
disappointing.
That was one reason for the weakness in stocks while the
price of Brent crude oil, despite tensions in the Gulf, remains
near recent 12-year lows below $37 a barrel LCOc1 .
Furthermore, the end next Monday of a 6-month "lockup" on
Chinese share sales by major institutional investors may cause a
massive evacuation from stocks, many fear.
The nervous backdrop, following on from last month's U.S.
interest rate rise, the first in almost a decade, has boosted
the dollar further against a basket of currencies following
gains of around 11 percent in 2015 .DXY .
The dollar gained further ground on the euro on Tuesday,
after initial estimates of euro zone inflation last month came
in below expectations. Consumer prices rose 0.2 percent, against
a median forecast of 0.3 percent.
The euro EUR= fell 0.7 percent to a one-month low of
$1.0757. The souring sentiment across global stock markets
boosted the Japanese yen, however, with the dollar falling 0.3
percent to 119.00 yen JPY= .
Concerns are also focused on the yuan which hit a new
trough, aggravating the share market slump. China's currency has
stabilised after interventions but the gap between the tightly
managed onshore yuan and its freer offshore counterpart widened
to 1.7 percent CNY= CNH= .
Investors sought the safe haven of bonds, pushing the
10-year Treasury note yield down 2 basis points to 2.22 percent
US10YT=RR .