By Christopher Whittall and Tommy Stubbington

Updated Aug. 11, 2015 5:19 p.m. ET

China’s devaluation of its currency jolted global markets Tuesday, hitting stocks and commodities and boosting government bonds.

The Dow Jones Industrial Average fell 1.2% to 17402.84, erasing most of the previous session’s gains. The S&P 500 fell 1% to 2084.07. The pan-European Stoxx Europe 600 index closed 1.6% lower.

Oil and metals prices also fell sharply, while demand for haven assets pushed down bond yields in the U.S. and Europe, as investors worried that Beijing’s move signaled concerns over growth in the world’s second-largest economy.

In the Markets

The moves came after the People’s Bank of China on Tuesday pushed down the yuan’s trading range against the dollar, setting its daily fixing rate 1.9% lower. Investors reacted to the move by pushing the yuan down almost 2% from that level.

Financial markets saw it as a sign that Chinese authorities believe it is necessary to act to boost flagging growth, said Ewen Cameron Watt, chief investment strategist at BlackRock’s Inc.’s Investment Institute.

“For markets today it’s a case of shoot first, ask questions later,” said Mr. Watt, whose firm oversees $4.7 trillion in assets.

A weaker yuan could hurt the competitiveness of firms outside China by making their goods and services relatively more expensive, while companies that generate sales in China could find revenue and profit generated in yuan are worth less in their home currency.