Tag: yuan
Stocks, Oil, Dollar Rise After China Cuts Rates

Stocks, Oil, Dollar Rise After China Cuts Rates

By Sinead Carew

NEW YORK (Reuters) — Stocks, oil prices and safe-haven bond yields rose on Tuesday as a tentative market rebound picked up pace after China cut interest rates and banks’ reserve requirements to kick-start its wavering economy.

Wall Street opened more than 2-percent higher, recouping some of its losses from the previous day’s selloff, its worst in four years, which had put the S&P 500 and Nasdaq composite indexes in correction territory.

The dollar motored ahead against most major currencies, rising 1 percent against the yen and 0.96 percent against its currency basket as the stimulus boost to the world’s China’s economy gave impetus to the case for a near-term interest rate hike in the United States.

Global markets were pummeled on Monday, with Chinese shares falling 8 percent, prompting investor calls for remedial action from authorities that grew louder overnight after the Shanghai Composite Index slumped a further 8 percent.

Economists said Tuesday’s response — a 25 basis point cut in key rates and 50 bps off the reserve requirement rate for large commercial banks — sent a clear signal that Beijing, which has stepped in several times this year to keep China’s growth on track, was still willing to intervene.

But as asset prices eased back following the initial euphoria, some questioned whether the measures would help.

“What we need to see to calm investors is positive economic data points out of China, and only when we see that will the rallies be sustainable,” said Xavier Smith, investment director at Centre Asset Management in New York.

As the previous day’s rush for safety reversed, yields on safe-haven U.S. Treasuries scaled back from session highs.

The Dow Jones industrial average rose 320.69 points, or 2.02 percent, to 16,192.04, the S&P 500 gained 42.78 points, or 2.26 percent, to 1,935.99 and the Nasdaq Composite added 129.26 points, or 2.86 percent, to 4,655.51.

The pan-European FTSEurofirst 300 index gained 3.95 percent. MSCI’s benchmark emerging stocks index rose 2.6 percent — its biggest jump in two years after seven days of back-to-back falls.

The stock market gains in Europe, which recouped the bulk of the 5-percent-plus lost the previous day when around 450 billion euros ($520 billion) was wiped off the FTSEurofirst 300’s value, were also supported by takeover news.

With China the world’s biggest consumer of commodities, crude and metals markets also responded to Beijing’s move.

U.S. crude futures traded up 2.3 percent at $39.10 per barrel, while Brent rose 2.3 percent to $43.69.

But global oversupply and worries over the severity of the slowdown in China kept oil prices near the 6-1/2-year lows they fell to on Monday, when the market slumped 6 percent.

Copper, often considered a proxy for global economic activity, rose 1 percent.

In China where recent market volatility has been at its most extreme, the central bank’s policy move — coming after a shock devaluation of the yuan two weeks ago — drew a guarded reaction.

“This is a big-bang move… Frankly (it) shows a bit of panic in my mind,” said Andrew Polk, resident economist at the Conference Board in Beijing.

(This version of the story was refiled to add dropped words in paragraph 3)

(Additional reporting by Tanya Agrawal in Bengaluru, John Geddie, Lionel Laurent, Marc Jones in Europe and China Economics writing by John Stonestreet; editing by Anna Willard and Nick Zieminski)

Photo: Traders work on the floor of the New York Stock Exchange August 25, 2015. REUTERS/Brendan McDermid

Great Fall Of China Sinks World Stocks, Dollar Tumbles

Great Fall Of China Sinks World Stocks, Dollar Tumbles

By Marc Jones

LONDON (Reuters) — Alarm bells rang across world markets on Monday as a near 9 percent dive in China shares and a sharp drop in the dollar and major commodities panicked investors.

European stocks were more than 5 percent in the red and Wall Street was braced for similar losses after Asian shares slumped to 3-year lows as a three month-long rout in Chinese equities threatened to get out of hand.

Oil plunged another 4 percent, while safe-haven government U.S. an German bonds and the yen and the euro rallied as widespread fears of a China-led global economic slowdown and currency war kicked in.

“It is a China driven macro panic,” said Didier Duret, chief investment officer at ABN Amro. “Volatility will persist until we see better data there or strong policy action through forceful monetary easing.”

Many traders had hoped that such support measures, which could include an interest rate cut, would have come from Beijing over the weekend after its main stocks markets slumped 11 percent last week.

With serious doubts also now emerging about the likelihood of a U.S. interest rate rise this year, the dollar slid against other major currencies.

The Australian dollar fell to six-year lows and many emerging market currencies also plunged, whilst the frantic dash to safety pushed the euro to a 6-1/2-month high above $1.15.

“Things are starting look like the Asian financial crisis in the late 1990s. Speculators are selling assets that seem the most vulnerable,” said Takako Masai, head of research at Shinsei Bank in Tokyo.

As commodity markets took a fresh battering, Brent and U.S. crude oil futures hit 6-1/2-year lows as concerns about a global supply glut added to worries over potentially weaker demand from the normally resource-hungry China.

U.S. crude was last down 3.6 percent at just below $39 a barrel while Brent dropped to $43.74 a barrel to take it under January’s lows for the first time.

Copper, seen as a barometer of global industrial demand, tumbled 2.5 percent, with three-month copper on the London Metal Exchange also hitting a six-year low of $4,920 a tonne. Nickel slid 6 percent to its lowest since 2009 too at $9,570 a tonne.

GREAT FALL OF CHINA

The near 9 percent slump in Chinese stocks was their worst performance since the depths of the global financial crisis in 2007 and wiped out what was left of the 2015 gains, which in June has been more than 50 percent.

With the latest slide rooted in disappointment that Beijing did not announce expected policy support over the weekend, all index futures contracts slumped by their 10 percent daily limit, pointing to more bad days ahead.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 5.1 percent to a three-year low. Tokyo’s Nikkei ended down 4.6 percent and Australian and Indonesian shares hit two-year troughs.

“China could be forced to devalue the yuan even more, should its economy falter, and the equity markets are dealing with the prospect of a weaker yuan amplifying the negative impact from a sluggish Chinese economy,” said Eiji Kinouchi, chief technical analyst at Daiwa Securities in Tokyo.

Just as worrying was evidence that developed markets were becoming synchronized with the troubles. London’s FTSE with its large number of global miners and oil firms, was down for its 10th straight day, its worst run since 2003.

The pan-European FTSEurofirst 300 was last down 5 percent at 1,355 points, wiping around 400 billion euros ($460.16 billion) off the index and taking its losses for the month to more than 1 trillion euros.

U.S. stock futures also pointed to big losses for Wall Street’s main markets, with the S&P 500, Dow Jones Industrial and Nasdaq expected to open down 3.6, 4.0 and 4.9 percent respectively.

It is likely to tip the S&P 500 and Nasdaq formally into ‘correction’ territory – meaning stocks, at their lows, are 10 percent off their 52-week highs.

“We are in the midst of a full-blown growth scare,” strategists at JP Morgan Cazenove said in a note.

(Additional reporting by Pete Sweeney in Beijing and Shinichi Saoshiro Hideyuki Sano in Tokyo; editing by John Stonestreet and Anna Willard)

Photo: An investor stands in front of an electronic board showing stock information at a brokerage house in Shanghai, China, August 24, 2015. REUTERS/Aly Song