Global stocks find a floor as Chinese data soothe nerves

Crude oil prices rebound as yuan firms

LONDON Aug 8, (RTRS): Stock markets enjoyed a tentative recovery on Thursday after better-than-expected Chinese export data, while a steadying of the yuan restored some calm to global markets following a stormy few days that sent investors scrambling for safety.

Investors were encouraged by data showing Chinese exports rose 3.3% in July from a year earlier, beating an expected decline of 2%. Chinese imports fell by less than forecast, despite the Sino-US tariff struggle.

Markets went into a tailspin on Monday after China let its currency weaken beyond 7 yuan per dollar, a surprise move that investors took as retaliation for US President Donald Trump’s announcement of more tariffs on Chinese imports.

Investors fear the trade conflict between the world’s two biggest economies will cause a global recession. Bond markets have flashed red and a closely watched US recession indicator reached its highest level since March 2007.

On Thursday, the pan-European Euro STOXX 600 rose 0.94%. Germany’s DAX was up 0.84% and France’s CAC 40 1.27%, while Britain’s FTSE 100 edged up 0.2%.

MSCI’s world stocks index, which tracks shares in 47 countries, rose 0.22%. It remains down 1.6% for the week and more than 3% since the start of August.

E-Mini futures for the S&P 500 gained 0.22%, pointing to a stronger open on Wall Street.

Investors ran for the safety of bonds this week as fears of a recession jumped.

Long-term borrowing rates hit their lowest ever – the aggregate yield on a Bloomberg-Barclays index of seven- to 10-year bonds worldwide dropped to a record 1.44% on Wednesday.

Yields on US 30-year bonds fell as low as 2.123% overnight, not far from a record low of 2.089% set in 2016. Ten-year yields dropped further below three-month rates, an inversion that has reliably predicted recessions in the past.

The Philippines became the latest country to cut interest rates, following aggressive moves by central banks in New Zealand, India and Thailand that had surprised markets on Wednesday.

European and US government bond yields rose on Thursday, with German and French 10-year yields up from record lows after a rally in recent sessions.

The 10-year US Treasury yield rose to 1.7275% from as low as 1.595% on Wednesday.

Few investors think the United States and China will be able to resolve their trade row any time soon and many are bracing for another confrontation.

“This most recent escalation in the US-China trade clash has increased the risk of a complete fallout in the negotiations considerably,” said Vasileios Gkionakis, a strategist at Lombard Odier, adding that the probability of a “deal breakdown” had increased to 40% from 25% previously.

Gold has surged this week as investors scrambled to find somewhere safe to park their cash, rising above $1,500 for the first time since 2013.

Spot gold was last at $1,495 per ounce, down from as much as $1,510 on Wednesday. Gold is up 16% since May.

In foreign exchange markets, the Japanese yen rose again, gaining 0.2% to 106.08 yen per dollar, although it remains off its weekly high of 105.5 hit on Tuesday. The yen tends to gain at times of uncertainty, and its rise this week underlined investors’ fears. China’s yuan also gained. In the offshore market it rose 0.2% to 7.0735 yuan per dollar after touching 7.14 yuan on Tuesday.

The dollar was steady, trading at $1.1196 against the euro.

Oil prices regained some ground on expectations that falling prices could lead to production cuts.

Brent crude climbed 0.7% to $57.48, which followed steep losses on Wednesday. US crude rallied 1.9% to $52.08 a barrel.

US

US stocks rose on Thursday as betterthan-expected domestic and Chinese data as well as a steadying yuan offered some comfort to investors rattled by an escalation in trade tensions.

However, the consumer staples sector came under pressure after Kraft Heinz Co shares tumbled 15% as the packaged food maker pulled its full-year forecast and wrote down the value of several business units by over $1 billion.

Markets have been roiled this week on worries of an escalating trade war after a slide in yuan on Monday was perceived as China’s retaliation to President Donald Trump’s latest threat of imposing a fresh round of tariffs on Chinese imports.

The benchmark S&P 500 index is looking at its third day of gains but still stands about 4.4% away from its record closing high hit last month.

At 9:44 am ET, the Dow Jones Industrial Average was up 83.38 points, or 0.32%, at 26,090.45, the S&P 500 was up 16.82 points, or 0.58%, at 2,900.80. The Nasdaq Composite was up 49.73 points, or 0.63%, at 7,912.56.

Symantec Corp shares jumped 9.4% after sources said chipmaker Broadcom Inc was in advanced talks to buy the cybersecurity company’s enterprise business. Advanced Micro Devices Inc gained 9.8% after the chipmaker launched its second generation of its processor chip for data centers and said that it had landed Alphabet Inc’s Google and Twitter Inc as customers.

Symantec and AMD were the best performing stocks on the S&P 500.

Lyft Inc advanced 4.3% after the ride hailing service raised its outlook for the year and forecast a faster path to profitability. Rival Uber Technologies Inc, due to report quarterly results after the bell, rose 4.2%.

UK

Mining stocks thrust London’s main index higher on Thursday after a round of Chinese data dissipated some global growth fears and nickel prices hit a 16-month high amid supply worries, while Hargreaves Lansdown advanced after strong annual results.

The FTSE 100, which fell almost 5% in the days after President Donald Trump said he would slap tariffs on more Fund supermarket Hargreaves Lansdown, whose shares took a beating in June as nearly a quarter of its clients were exposed to Neil Woodford’s suspended fund, advanced nearly 12% after a forecast-beating rise in full-year assets.

“We think Hargreaves Lansdown has likely successfully defended its reputation with consumers,” Jefferies analysts wrote, as the stock enjoyed its best day since March 2014.

Miners, which have been pressured recently as US-China trade tensions hit metal prices, snapped seven straight days of losses as nickel prices jumped amid worries that major supplier Indonesia could soon ban ore exports.

Gains in the blue-chip index were kept in check by a 5.9% drop in telecom giant BT as the stock traded ex-dividend.

Europe

European shares had their best day in almost two months on Thursday as upbeat trade data from China and a steadying of its currency helped to calm some fears of recession and a further escalation in Sino-US trade tensions.

The pan-European STOXX 600 index rose for a second day, closing 1.7% higher, swept up in a global rally after days of turmoil sparked by an escalation in USChina trade tensions last week.

All major indexes in Europe were up more than 1%, although a fall in stocks trading ex-dividend kept a lid on gains in London’s FTSE.

On the earnings front, Zurich Insurance Group surged nearly 4% after the insurer said it was set to beat its 2019 financial targets. This sent the Swiss main index 2.3% higher in its strongest day in more than seven months.

Asia

In Asia, the Shanghai Composite Index rose 0.9% to 2,794.55 and Tokyo’s Nikkei 225 was 0.4% higher at 20,593.35. Hong Kong’s Hang Seng added 0.5% to 26,120.77 and South Korea’s Kospi advanced 0.6% to 1,920.61.

Australia’s S&P-ASX 200 was 0.7% higher at 6,568.10 and India’s Sensex rose 1.2% to 37,146.63. Markets in Taiwan, New Zealand and Southeast Asia also advanced.

Oil

Oil jumped more than $1 a barrel on Thursday on expectations that falling prices could lead to production cuts, coupled with a steadying of the yuan currency after a week of turmoil spurred by an escalation in US-China trade tensions.

Brent crude was up 83 cents at $57.06 a barrel by 1326 GMT, after hitting a session high of $58.01.

US West Texas Intermediate (WTI) crude futures rose $1.18 to $52.27 a barrel after hitting a peak of $52.84.

China’s yuan strengthened against the dollar and its exports unexpectedly returned to growth in July on improved global demand despite US trade pressure.

Both crude contracts fell to their lowest since January on Wednesday after the US Energy Information Administration said U.S. crude stockpiles rose last week after nearly two months of decline as imports hit their highest since January.

Crude oil shipments into China, the world’s largest importer, in July rose 14% from a year earlier as new refineries ramped up purchases. Fuel exports continued to climb as supply outstripped demand in the world’s second-largest oil consumer.

Saudi Arabia plans to keep its crude oil exports below 7 million barrels per day in August and September despite strong demand from customers, to help drain global oil inventories and bring the market back to balance, a Saudi oil official said.

Geopolitical tensions over the safety of oil tankers passing through the Arabian Gulf remained unresolved as Iran refused to release a British-flagged tanker it seized last month.

The US Maritime Administration said US-flagged commercial vessels should send their transit plans for the Strait of Hormuz and Gulf waters to US and British naval authorities, and that crews should not forcibly resist any Iranian boarding party.

Currencies

The dollar index inched higher on Thursday and the Chinese currency strengthened after the Chinese central bank fixed the yuan at a stronger level than expected, boosting risk appetite. The People’s Bank of China (PBOC) set the mid point rate at 7.0039. The fixing was still the weakest in more than a decade, however. The dollar fell 0.19% against the offshore yuan to7.0681. The dollar index against a basket of currencies gained 0.07% to 97.614. On Monday, China allowed its currency to weaken past 7 per dollar for the first time since 2008, sparking broad risk aversion on concerns that the US-China trade war was escalating. The move came in response to US President Donald Trump’s announcement last week that he would impose more tariffs on Chinese goods. Washington labeled Beijing a currency manipulator on Monday. Trade tensions are likely to continue to weigh on the Chinese currency and risk appetite, with no resolution to the US-China dispute in sight. Increasingly dovish central bank policies are also adding to nerves that the global economic outlook may be worse than feared-central banks in New Zealand, India and Thailand all cut rates on Wednesday. The euro jumped briefly on Thursday after Reuters reported that Germany is considering ditching its long-cherished balanced budget goal by issuing new debt to finance a costly climate protection package. The single currency has been boosted in recent days by the wind of emerging market carry trades that were funded in euros.