Stocks rebound on yuan stabilization
Chinese currency value strengthened by move
BEIJING — Tensions between the U.S. and China over trade subsided a bit, giving U.S. investors a reason to wade back into stocks after a big sell-off a day earlier.
Still, experts worried that recent actions by the two sides presage a prolonged battle over trade that could slow global economic growth.
China stabilized its currency Tuesday, suggesting that it might hold off from aggressively letting the yuan weaken as a way to respond to U.S. tariffs on Chinese goods. That came a day after Beijing sent financial markets tumbling by allowing the currency to fall to an 11-year low against the dollar.
A weaker yuan can help neutralize U.S. tariffs on Chinese goods by making them more price-competitive on international markets. The Chinese currency declined to 7.0562 to the dollar before strengthening back to 7.0264.
The U.S. Treasury Department on Monday officially declared that China improperly manipulates the yuan’s value just hours after President Donald Trump accused China of currency manipulation. American officials have long complained that a weak yuan makes China’s export prices unfairly low, hurting foreign competitors and swelling Beijing’s trade surplus.
The designation could open the way to possible new penalties on top of tariff hikes already imposed on Chinese goods in a fight over Beijing’s trade surplus and technology policies.
Things were calmer Tuesday. After falling 3 percent Monday, the S&P 500 index rose 1.3 percent, its first gain in seven days.
Trump and economic adviser Larry Kudlow made the case that the U.S. economy is in a better position to withstand a trade war.
But relations remain tense between the two countries and economists and analysts fret about the impact on the economy.
The U.S. and China are scheduled to resume trade talks in September in Washington.