1. China allows yuan to sink further
China allowed the yuan to fall sharply for the second straight day on Wednesday to hit the lowest level since October 2012, one day after announcing a near-2% devaluation of the exchange rate.
The 4% two-day plunge stoked concerns that China may allow the yuan to continue to depreciate, fueling fears over a currency war, as Beijing aims to make the nation's ailing exports more competitive on the global stage.
Some traders believe that the Federal Reserve could postpone raising interest rates as soon as September in response to China’s currency devaluation move, as Fed officials are likely to remained concerned over global growth and inflation pressures.
2. Risk-related assets feel the pain
Risk-related assets sold-off on Wednesday, with global stocks, emerging market currencies and commodities all under pressure, while safe-haven assets, such as government bonds and gold, saw a boost in demand.
Asian equity markets headed further south on Wednesday, with China's Shanghai Composite, Japan's Nikkei, Hong Kong's Hang Seng and Australia's S&P/ASX 200 all falling more than 1%.
In Europe, the EURO STOXX 50 tumbled 1.88%, France’s CAC 40 plunged 1.83%, Germany’s DAX 30 plummeted 1.97%, while London's FTSE 100 lost 1.3%.
Meanwhile, currencies like the Malaysian ringgit, the Indonesian rupiah and Philippine peso hit fresh multiyear lows amid concerns central banks could move to weaken their own currencies in response to China's move.
Elsewhere, copper prices plunged to the lowest level since June 2009, while oil futures hovered near six-year lows.
3. IEA sees oil glut continuing through 2016
In its monthly report released earlier in the session, the International Energy Agency said that global oil demand is forecast to increase by 1.6 million barrels a day this year, raising its projection from last month by 200,000 a day.
However, the agency warned that a global oil glut will last through next year, saying that, "while a rebalancing has clearly begun, the process is likely to be prolonged as a supply overhang is expected to persist through 2016, suggesting global inventories will pile up further."
Global oil production is outpacing demand following a boom in U.S. shale oil production and after a decision by the Organization of Petroleum Exporting Countries last year not to cut production.
4. U.S. data and Fed speakers in focus
The U.S. is to publish data on job openings for June at 10:00AM ET, followed by the federal budget for July at 2:00PM.
At 8:30AM, New York Federal Reserve President William Dudley will give a speech in Rochester. His comments will be closely watched for further hints regarding the strength of the economy and the timing of a Fed rate hike.
5. Wall Street earning season begins to wind down
Macy`s (NYSE:M) and Alibaba (NYSE:BABA) are due to report quarterly earnings ahead of Wednesday's opening bell, while Cisco Systems (NASDAQ:CSCO) and News Corp (NASDAQ:NWSA) are due after the bell.