Global stocks, Asian currencies fall after China unexpectedly devalues yuan

BEIJING-China (Aug 11)  Global stocks and Asian currencies fell Tuesday after China unexpectedly devalued the yuan in response to weakening trade and growth.

KEEPING SCORE: In early trading, France’s CAC-40 fell 0.9 per cent to 5,150.49 and Germany’s DAX lost 0.8 per cent to 11,512.47. Britain’s FTSE 100 shed 0.4 per cent to 6,712.12. Wall Street looked set to give up some of the previous day’s gains. The future for the Dow Jones industrial average fell 0.3 per cent to 17,502.00. S&P 500 futures eased 0.3 per cent to 2,094.20.

CHINA’S DEVALUATION: Beijing’s devaluation of the yuan allowed it to fall by its biggest one-day margin in a decade. The central bank said the 1.9 per cent fall was due to changes aimed at making the way it sets exchange rates more market-oriented. In recent months, the yuan has strengthened along with the U.S. dollar as currencies of other developing countries weakened, hurting Chinese exporters. Exports fell by an unexpectedly large 8.3 per cent in July. The People’s Bank of China said market forces would be given a bigger role in setting the exchange rate, leaving open the possibility of more declines.

ASIA’S DAY: Tokyo’s Nikkei 225 lost 0.4 per cent to 20,720.75 and Seoul’s Kospi was off 0.8 per cent at 1,986.65. The Shanghai Composite Index ended little changed at 3,927.91 and Hong Kong’s Hang Seng declined 0.1 per cent to 24,498.21. Sydney’s S&P/ASX 200 lost 0.7 per cent to 5,473.20 and India’s Sensex shed 0.7 per cent to 27,942.70. Singapore, Bangkok and Jakarta also retreated.

THE QUOTE: China’s yuan announcement “looks to be a move to a more open market policy,” said Stephen Innes, senior trader at OANDA. “Traders are looking for U.S. dollar strength across the Asia region and pressure on all local currencies,” he said. “The market is extremely volatile at moment.”

CURRENCIES: The Australian dollar sank 1.3 per cent to $0.7330. The U.S. dollar also gained against a raft of Asian currencies including a 0.5 per cent rise against the Indian rupee and a 1.5 per cent jump against the South Korean won. It rose 0.7 per cent versus the Indonesia rupiah. The euro rose to $1.1041 from $1.1021. The dollar gained to 124.82 yen from Monday’s 124.55 yen.

FED WATCH: Some investors are anticipating the Federal Reserve will raise interest rates next month. That unnerves them because rates close to zero have been a major factor in driving a bull-market in stocks that has lasted for more than six years.

ENERGY: Benchmark U.S. crude rose 6 cents to $45 per barrel in electronic trading on the New York Mercantile Exchange. The contract jumped $1.09 to $44.96 on Monday. Brent crude, used to price international oils, added 2 cents to $50.43 after soaring $1.80 the previous session to $50.41.

Source: CanadianBusiness