Mainland Chinese shares extended losses in a volatile session, following Monday's suspension of trading which led to a global equities sell-off.
The Shanghai Composite fell 0.3% to close at 3,287.71 points, although it had opened more than 3% lower.
Hong Kong's Hang Seng index also fluctuated through the day, and ended 0.7% lower at 21,188.72.
Trading in Shanghai was suspended early on Monday under a new rule designed to limit dramatic falls in markets.
But regulators said on Tuesday they may restrict stock sales to stem falls.
The China Securities Regulatory Commission said it would consider restricting the proportion of shares that major shareholders could sell during a given period of time.
The central bank also injected an unexpected 130bn yuan (£13.55bn; $19.94bn) into the market to keep borrowing costs down - in a move to reassure retail investors.
The measures, however, did little to prevent Chinese shares from falling in afternoon trade.
More volatility ahead?
Analysts said investors were waiting to see if Beijing could stem the latest selling in Chinese stocks and whether more measures would be introduced.
But Bernard Aw, market strategist at trading firm IG, said Beijing was arguably more concerned about economic growth than the stock market.
"Furthermore, it could look really bad if they have to throw in more measures when they are in the process of withdrawing the [last] rescue measures," he said in a note.
The new "circuit breaker" rule that suspended trading nationwide for the first time on Monday was created after sharp falls last summer and was meant to curb market volatility in China.
Overnight, US benchmark indexes lost up to 2% as concerns grew that the dive in the Chinese stocks was the start of another volatile period after last summer's dramatic market rout.
Oil continues to weigh
Escalating tensions in the Middle East, which affected oil prices, also dented investors' confidence.
Japan's Nikkei 225 index ended 0.4% lower at 18,374.00, while Australia's S&P/ASX 200 closed down 1.6% at 5,184.43.
Only South Korean shares bucked the downward trend after a senior finance ministry official said the government would take action to stabilise the market if needed, following Monday's steep plunge.
European shares fell on Monday on the first trading day of 2016 after weak Chinese data rekindled global growth worries, while oil prices jumped and bond yields dropped on rising tensions in the Middle East.
Chinese manufacturing surveys showed that any hopes for a recovery in the sector were premature, with factory activity contracting for a 10th straight month in December and at a faster pace than in the previous month.
Adding to the worries, China's central bank fixed the yuan at a 4-1/2 year low. Mainland Chinese shares .CSI300 fell 7 percent, prompting the stock exchange to halt trading.
European stocks followed Asia's lead. The pan-European FTSEurofirst 300 index .FTEU3 fell 2.3 percent, while the euro zone's blue-chip Euro STOXX 50 index .STOXX50E declined by 2.6 percent. Germany's DAX .GDAXI dropped 3.4 percent.
"(Equity) investors are not going to like the start of this year, particularly when you have news that trading was halted in China due to a market sell-off," said Naeem Aslam, chief market analyst at AvaTrade.
Global oil benchmark Brent LCOc1, which fell 35 percent last year due to fears of over-supply in a global slowdown, climbed more than a dollar to a high of $38.50 per barrel before easing back to $37.47.
The rise came as relations between leading crude producers Saudi Arabia and Iran deteriorated, raising concerns about potential supply disruptions.
Saudi Arabia, the world's biggest oil exporter, cut diplomatic ties with Iran on Sunday in response to the storming of its embassy in Tehran. Bilateral tensions escalated following Riyadh's execution of a prominent Shi'ite cleric on Saturday.
The Saudi riyal fell sharply against the dollar in the forward foreign exchange market. One-year dollar/Saudi riyal forwards SAR1Y= jumped to 680 points, near a 16-year high.
SAFE HAVENS
Those tensions prompted investors to seek the safety of bonds, with yields on triple-A rated German 10-year Bunds DE10YT=TWEB falling 6 basis points to 0.575 percent.
The cautious mood towards riskier assets helped the Japanese yen, with the dollar falling below 119 yen for the first time since mid-October JPY=.
Gold XAU= jumped nearly 1 percent to $1,069.20 per ounce.
"Concern over the health of the Chinese economy accompanied by spiking tensions in the Middle East have combined to ensure ... firm demand for safe-haven assets," Rabobank strategists said in a note.
The offshore yuan fell as low as 6.6185 to the dollar CNH=D3, its weakest since early 2011. Onshore, the yuan CNY= hit its lowest since April 2011, at 6.5166.
The euro firmed 0.5 percent to $1.0915 EUR=.
Investors are wondering how much further the U.S. Federal Reserve will raise rates this year after its first rate hike in almost a decade last month.
An immediate focus will be on Monday's ISM survey on U.S. manufacturing, which is expected to show the sector is still in contraction after hitting a 6-1/2-year low in November. USPMI=ECI
"It was quite unusual for the Fed to raise rates when the ISM is below 50, (which indicates contraction). And we are likely to see another month of contraction. We have to see how long this will continue," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
LONDON | By Marius Zaharia
(Additional reporting by Dhara Ranasinghe in London and Hideyuki Sano in Tokyo; editing by John Stonestreet)
Image copyrightDennis DoyleImage captionSpain's shops hope the economic recovery will drive strong Christmas business
Spanish shops are now hiring at pre-crisis levels, while business confidence is also holding up in Italy, according to official figures.
Spain's national statistics agency said retail hiring in November grew 1.8% on last year, the fastest rate since Spain entered a deep recession in 2008.
In Italy, figures on Tuesday showed business confidence fell in December, but remained close to recent highs.
Italy and Spain are the eurozone's third and fourth largest economies.
Spanish retail sales increased 3.3% in November compared to last year, the sixteenth consecutive month of growth, according to the National Statistics Institute.
Christmas confidence
Many retailers are confident this will be the best Christmas period for business since the country's recovery started.
Higher household spending in Spain this year, fuelled by falling oil prices and tax cuts, has helped to boost Spanish shops and drive economic growth.
Spain's economy grew 0.8% in the third quarter, while the growth rate in Italy was lower than expected at 0.2%, according to EU figures.
Despite the slowdown, morale among Italian businesses and consumers remains high.
Business confidence fell to 105.8 from 107.1 in November, according to Italian statistic agency ISTAT's composite business morale index, which combines surveys of the manufacturing, retail, construction and services sectors.
Consumer confidence dropped to 117.6 from a record high of 118.4 in November, although it was still above analyst expectations.
Global stocks extended a rally into a third day on Wednesday as oil edged up from 11-year lows and the dollar eked out minor gains in trade gradually winding down for the holidays.
European shares rose on the last full trading day before the Christmas break, following Asian bourses higher.
The pan-European FTSEurofirst 300 index .FTEU3 rose 1.5 percent, led by miners which rallied on higher copper prices. London-listed miners Glencore (GLEN.L) and Anglo American (AAL.L) both rose more than 4 percent.
"We think commodities are due for a bounce, and that should help mining stocks," HED Capital managing director, Richard Edwards, said.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.6 percent to the highest in almost two weeks. Tokyo markets were closed for the Emperor's Birthday holiday.
In China, the blue-chip CSI 300 index .CSI300 broke a four-day winning streak and closed down 0.3 percent while the Shanghai Composite index .SSEC ended down 0.4 percent.
China's state news agency Xinhua said slashing the country's excess steel capacity would be a top priority for the government over the next five years.
MSCI's all-country world stocks index .MIWD00000PUS was up 0.36 percent, though it is down 4.5 percent for the year.
Equity investors were encouraged after gains of 1 percent in the Dow Jones industrial average .DJI lifted Wall Street for a second day on Tuesday.
Data on Tuesday showed U.S. economic growth in the third quarter was revised down slightly to a 2.0 percent annual pace but this still beat forecasts.
Oil prices struggled to lift off lows plumbed earlier in the week. Brent crude LCOc1, the global benchmark, stood at $36.50 a barrel, up 39 cents, having touched an 11-year low of $35.98 late on Tuesday.
The dollar strengthened versus the euro and held broadly steady against a basket of major currencies.
The euro EUR= fell 0.3 percent to $1.0922 while the Japanese yen JPY= was barely changed at 120.97 per dollar.
The euro has performed well this year at times of risk aversion, as investors have unwound carry trades in which the euro is borrowed then sold for higher-yielding currencies.
"When you are in an environment where rate expectations are stable, the euro is mostly driven by risk sentiment," said Credit Agricole currency strategist Manuel Oliveri in London.
"So we could imagine that the euro goes to $1.10 or so into the end of the year,"
Yields on low-risk government bonds were little changed. German 10-year Bunds DE10YT=TWEB, the euro zone benchmark, yielded 0.61 percent, up 1 basis point on the day.
Ten-year U.S. Treasuries US10YT=RR yielded 2.239 percent, unchanged from Tuesday's close in New York.
Gold XAU= traded at $1,071.60 an ounce.
(Additional reporting by Wayne Cole in Sydney; editing by John Stonestreet)
Lift off! For the first time in ten years the US Federal Reserve has raised interest rates.
As expected rates were increased by 0.25% to a range of 0.25% to 0.5%.
For almost a decade money has been cheap - some would argue too cheap. But today's rise in US interest rates could be the beginning of a new era, one in which the cost of borrowing rises - possibly for years.
So should we cancel Christmas, buy some tinned food and hide in the cellar, or shrug and return to our online shopping?
Let's take a look at what, and who, might be affected by the expected increase.
Why it matters for the US economy
A rate rise can be seen as a vote of confidence by the Federal Reserve in the US economy.
But despite those healthy indicators, interest rates are at emergency levels.Between September 2007 and December 2008 the benchmark Federal Funds rates fell from 5.25% to between zero and 0.25% in an effort to stave off recession.
Economists argue it is high time rates started to head higher, to prevent excessive consumer borrowing and prevent bubbles emerging in the housing market and other types of assets.
There is some concern over companies that have borrowed too much. Rising interest rates could make it more expensive or impossible for them to refinance their debts.
In particular fracking firms, which produce oil and gas, have been under scrutiny by investors. Not only do they tend to borrow quite heavily, they are also exposed to the falling price of oil. Rising interest rates could see failure rates among such firms rise.
Image copyrightGetty Images
Why it matters for US consumers
The effect of the first rise in interest rates on US consumers is likely to be muted. There are a few reasons for this.
A 0.25% rise is fairly modest and in the short term the cost of borrowing will not rise by much.
Also American households are less in debt than before the financial crisis. According to the New York Federal Reserve overall household debt remains 5% below its peak in 2008.
And US home owners are less sensitive to moves in interest rates as mortgage rates are usually fixed over 30 years.
Nevertheless the extended period of low interest rates has fuelled rising house prices, record car sales and expansion in credit card debt.
Rising interest rates should cool conditions in those hotter markets.
Image copyrightGetty Images
Why it matters in emerging markets
There are a number of circuits in the global economy which link what happens at the US Federal Reserve building in Washington, with countries that have developing economies like China and Brazil.
An era of rising US interest rates is likely to strengthen the dollar. That could cause pain for companies and countries that have raised debt in dollars. If they earn much of their income in a local currency, then servicing a debt in dollars will become more expensive as the dollar rises.
Rising US interest rates affects how investors view risk. If they can earn a more attractive return on investments in the US, they might shun investments in far-flung and riskier nations.
So companies and governments in the emerging world could find it harder to attract investment, or refinance existing debts.
Finally, higher interest rates also come at a bad time for many emerging economies, particularly those that rely on exporting commodities. The price of oil, metals and agricultural commodities have fallen dramatically.
So companies and governments could face higher borrowing costs at a time when earnings from mining and agriculture are falling.
The view from Africa: Matthew Davies, Africa Business Report
The rise in US interest rates is another cloud in what is rapidly becoming a perfect storm for many African economies.
Though widely anticipated, the increase in the Federal Funds rate triggered yet another fall in value of Africa's most widely traded currency, the South African rand.
In an effort to mitigate the inflationary effects of their falling currencies, Africa's central banks have been raising interest rates, which in itself can limit economic growth.
But the Fed's move really means a reversal of the flow of cheap money. Over the past few years, so-called "hot money" has been looking for decent rates of return and billions flowed into Africa.
Now many African governments are lumbered with large dollar debts and a reduced capability to service them.
The past year has also seen big falls in commodity prices as demand from China has slumped.
The persistently low oil price has been hampering the national budget's of Nigeria and Angola.
If this perfect storm gets much worse, it could be a bleak 2016 for several African economies.
The currency markets are extremely sensitive to moves in interest rates. The US dollar has already been rising in anticipation of higher interest rates.
Against a basket of other currencies the dollar is up almost 4% since October, when the chair of the US Federal Reserve Janet Yellen indicated that rates could head higher in December.
Economists are not sure how much further the dollar will strengthen and much depends on the Fed's actions over the coming months.
The effects of the stronger dollar can already be seen in the earnings reports of US companies. Many have blamed weaker profits on the strength of the dollar, which erodes the value of sales made overseas. It also makes their exports less competitive on the international markets.
Image copyrightGetty Images
Why it matters for the UK
The Bank of England denies that its own decisions on interest rates track those of the US Federal Reserve.
However, economists say that now the Fed has moved higher, it will make it easier for the Bank of England and its chief Mark Carney to raise rates as well.
The UK economy is arguably in even better condition than its US counterpart and many economists say that a rate rise is long overdue.
If the Bank of England follows the Fed, then the pound could rise too, particularly against the euro. That would be painful for many British exporters, as the European Union is the biggest market for British goods.
Stocks on Wall Street dropped in afternoon trading, having recorded big rises on Wednesday after the Fed's announcement.
The Dow Jones rose 1.3% on Wednesday, but on Thursday it closed down 1.43%.
However, analysts were upbeat about market performance running up to Christmas.
"With the uncertainty surrounding the Fed now cleared and panic not ensuing, everything is now in place for a strong end to the year," said Craig Erlam at Oanda trading group.
Carmakers, banks and insurers - stocks which do well when an economy is growing - rose.
'No nasty surprises'
On the currency markets, the dollar rose against major currencies following the Fed's decision.
Higher rates make the US a more attractive market for deposits, meaning demand for the dollar is likely to rise.
The dollar rose by 0.95% against the euro, to €0.9255, and by 0.76% against the pound to, £0.6722.
British government-issued bonds, or gilts, rose in price following the Fed decision, meaning lower yields, or income.
While the spectre of higher rates is often bad for existing debt prices, analysts said investors were pleased future Fed rate rises would be "gradual" in nature.
"Overall, there were no nasty surprises in there - the Fed sounded quite dovish, data-dependent, so I think fixed income markets were quite happy with it," Jason Simpson at Societe Generale.
Eighteen nations including the U.S., Japan and Germany will work together to develop international carbon markets to help speed the pace of emission reductions under the Paris climate deal struck Saturday, according to the New Zealand government.
The nations will develop standards and guidelines to ensure trading of carbon credits has environmental integrity, according to a statement sent by Jonathan Franklin, spokesman for Tim Groser, New Zealand’s climate and trade minister.
Saturday’s deal by envoys from more than 190 countries gathered in Paris allows cooperation between nations to meet emission-limitation pledges. It also creates a new market to promote sustainable development, speeding carbon cuts by state entities and private companies. China plans to create the world’s biggest carbon market by 2017, about double the size of 10-year old European program, currently the largest. China and India aren’t part of the 18-nation group.
The standards will encourage other countries to support markets to “complement the Paris Agreement and with the ultimate aim of strengthening action under the United Nations Framework Convention on Climate Change,” the 18 countries said. “Through this declaration we want to send a clear signal to the global carbon market and provide certainty that there is an important role for markets in the post-2020 period.”
The countries are Australia, Canada, Chile, Colombia, Germany, Iceland, Indonesia, Italy, Japan, Mexico, Netherlands, New Zealand, Panama, Papua New Guinea, Republic of Korea, Senegal, Ukraine, and the U.S.
AFP
