China fixes its yuan at stronger than 7 per dollar
The global sell-off in equities abated after China fixed its yuan exchange rate at stronger than 7 per dollar, a key level that when breached in markets on Monday fueled the rout. Three main U.S. stock-index futures all gained with the futures on the S&P 500 Index jumping 0.9, setting for the largest climb in six weeks. Investors are contemplating the week’s brutal start that was triggered by yet another escalation in the trade struggle between the two largest economies. China’s move to stabilize the yuan on Tuesday offered some reassurance. But it came too late to avoid the “manipulator” designation that could open the door to new penalties on top of the tariff hikes already imposed on Chinese goods. U.S. Treasury Secretary Steven Mnuchin will now “engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions,” the department said in a statement. For its part, China said the recent yuan depreciation was decided by the market, not Beijing, and denied the Trump administration’s accusation.
In Europe the Stoxx Europe 600 index increased 0.5%, the biggest advance in more than a week while the U.K.’s FTSE 100 Index rose 0.1%, the first gain in more than a week. In Germany the DAX Index increased 0.6%, the biggest climb in more than a week In Asia the MSCI Asia Pacific Index fell for a fifth session, declining 0.8%, hitting the lowest in almost seven months with its fifth straight decline. On the currencies front, the yen pulled back from its strongest closing level in more than one year. Bitcoin advanced, with its week-long rally carrying the digital token back above $12,000 for the first time three weeks. The dollar nudged lower as the pound strengthened as opponents of a no-deal Brexit hardened their plans to stop Prime Minister Boris Johnson from possibly trying to leave the European Union with no agreement. Elsewhere, Australia’s dollar rebounded, only briefly trimming gains after its central bank kept rates unchanged at record lows and said “an extended period” of low rates will likely be required. The country’s bonds rallied, sending the 10-year yield below 1% for the first time. Japanese rates fell below the central bank’s target range and US Treasuries gave back some of their surge from Monday, when they reached the most extreme yield-curve inversion since the lead-up to the 2008 financial crisis. The yield on 10-year Treasuries jumped four basis points to 1.75%, the largest surge in more than three weeks.
Gold was little changed at $1,464.21 an ounce, the highest in more than six years as oil edged higher with the West Texas Intermediate crude climbing 0.4% to $54.93 a barrel.
This article was compiled by BOV Asset Management Limited, a member of the BOV Group. BOV Asset Management,TG Complex, Suite 2, Level 3, Brewery Str., Mriehel BKR 3000. Email: infoassetmanagement@bov.com Internet address: www.bovassetmanagement.com. BOV Asset Management is licensed by the MFSA.