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GLOBAL MARKETS-Rout relents as China keeps yuan on leash

Published 08/06/2019, 05:10 PM
Updated 08/06/2019, 05:20 PM
GLOBAL MARKETS-Rout relents as China keeps yuan on leash
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MIAPJ0000PUS
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(Recasts with European market moves)
* European stocks claw higher, Wall Street futures up after
slump
Yuan still weak but retreat stalls on firmer-than-expected fix
* U.S. Treasury 10-year yield edges up from Oct 2016 lows
* MSCI Asia-Pacific index down 0.75%, Nikkei loses 0.7%
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Marc Jones
LONDON, Aug 6 (Reuters) - A rout in global markets moderated
on Tuesday as China kept the yuan on a tight leash after its
landmark drop past 7-per-dollar led the United States to label
Beijing a currency manipulator.
The trade war between the world's top economies remained
near boiling point, but the heat had been reduced just enough by
a firmer-than-expected official Chinese central bank yuan rate
overnight to steady some nerves. .EU assets, including bonds and some currencies such
as the yen and Swiss franc, settled down as investors moved
tentatively back into the euro, pound and some of the emerging
market currencies that have been hit in recent days.
The mood was still fragile though.
"I think the tipping point for a more prolonged negative
trend (for risk assets) is quite close," said SEB Investment
Management's head of asset allocation Hans Peterson, referring
to the trade war escalation and other risks such as Brexit.
"We have reduced both European and global equities. We still
have a small overweight in EM (emerging market) stocks but just
a small one."
Trump and U.S. Treasury Secretary Steven Mnuchin had said on
Monday that China was manipulating its currency, and that
Washington would engage the International Monetary Fund to
eliminate unfair competition from Beijing. "Officially labelling China a currency manipulator gives the
United States a legitimate reason to take even more steps," said
Norihiro Fujito, senior investment strategist at Mitsubishi UFJ
Morgan Stanley Securities.
"The markets are now scrambling to factor in the possibility
of the United States imposing not only an additional 10% of
tariffs on Chinese imports, but the figure being raised to 25%.
Goldman Sachs also said it no longer expects the United
States and China to seal a deal before the November 2020 U.S.
presidential election as policymakers from the world's largest
economies are "taking a harder line".
Though U.S. Treasury yields had edged up from October 2016
lows of 1.672%, German yields stayed down with markets now
pricing in a 100% chance that the European Central Bank will cut
its already deeply negative interest rates at its next meeting.
ECBWATCH

YUAN TO WATCH
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS had ended down 0.75% after brushing its lowest
since January. It has lost 3.7% so far this week.
The Shanghai Composite Index .SSEC retreated 1.4%, while
Japan's Nikkei .N225 shed 0.7%, Australian stocks .AXJO fell
2.3% and South Korea's KOSPI .KS11 slid 0.9%.
China's offshore yuan stretched the previous day's slide,
and briefly weakened to 7.1382 CNH=D4 , the lowest since
international trading in the Chinese currency began in 2010. But
it pulled back to 7.0469 after Beijing's firmer-than-expected
yuan fixing on Tuesday.
The Japanese yen, a perceived safe-haven in times of market
turmoil and political tensions, touched a seven-month high of
105.520 per dollar JPY= before dropping back to 106.700 in
volatile trade.
The Swiss franc, another currency sought in times of
turmoil, has gained roughly 1% against the dollar this week. It
set a six-week peak of 0.9700 franc per dollar CHF= .
Japan's 10-year yield JP10YTN=JBTC fell to a three-year
trough of minus 0.215%.
Brent crude oil futures LCOc1 plumbed a seven-month low of
$59.07 per barrel as the trade war raised concerns about lower
demand for commodities. Brent last traded at $60.41 for a gain
of 1% as bargain hunting kicked in. O/R
Spot gold XAU= advanced to a six-year peak of $1,474.80 an
ounce as investors sought the safety of the precious metal.


<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Onshore Chinese yuan https://tmsnrt.rs/2MFqXZS
World stocks and US 10-year yield https://tmsnrt.rs/2MHiXYj
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

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