Thread: China's Yuan Tumbles, Stocks Plunge, Yen Climbs: Markets Wrap

China's Yuan Tumbles, Stocks Plunge, Yen Climbs: Markets Wrap

(Bloomberg) -- China’s yuan fell past 7 per dollar, a level that had long been a focus for investors as a line in the sand for the country’s policy makers. The move pulled other Asian currencies down and exacerbated a sell-off in stocks.The Japanese yen jumped along with U.S. Treasuries as traders bought haven assets. The MSCI Asia Pacific Index headed for its biggest decline since October. Shares slumped over 3% in Hong Kong, which is also seeing turmoil from transportation disruptions as political tensions escalate there. Japanese and Korean equities slid more than 2% and S&P 500 Index futures tumbled more than 1%. Stocks took another leg lower after Bloomberg reported that China has asked state purchasers to halt imports of American agricultural products.Chinese stocks saw more modest declines. In the past, in times of volatility Chinese state-linked funds have sometimes propped up that market. China’s yuan saw its biggest drop since August 2015, when officials announced a surprise devaluation that roiled markets at the time. The People’s Bank of China said that it is able to keep the currency stable and at a reasonable level, and that it passed 7 per dollar because of trade protectionism.“Fears of a yuan depreciation and currency wars have ramped up again,” which will only compound the issue across broad financial markets, Chris Weston, head of research at Pepperstone Group, wrote in a note.Ten-year Treasury yields dropped to their lowest since November 2016. Traders are now pricing in a more-than-100% chance of the Federal Reserve cutting interest rates again in September. American stocks will open after on Friday recording their worst week since the sell-off in December. A solid July U.S. jobs report did little to alter views on the economy and path for interest-rate policy.Eyes may now turn to any reaction by President Donald Trump to the Monday news about China’s exchange-rate slide. In the past he has criticized China for manipulating its currency for competitive export advantage. Wall Street has also speculated about the potential for the Trump administration to intervene to cap dollar gains, though analysts have flagged plenty of challenges with such a step.Elsewhere, oil dropped toward $55 a barrel amid the escalation trade tensions. Commodities came under renewed pressure, with iron ore futures in Singapore plunging below $100 a ton.These are some key events to watch out for this week:Earnings from financial giants include: SoftBank, HSBC, UniCredit, AIG, ABN Amro Bank, Standard Bank, Japan Post Bank.Five Asian central banks have rate decisions including India, Australia and New Zealand.A string of Fed policy makers speak this week. Governor Lael Brainard is up first on Monday, followed by St. Louis chief James Bullard on Tuesday and Chicago’s Charles Evans a day later. All are Federal Open Market Committee voters.Here are the main moves in markets:StocksTopix index tumbled 2.7% as of 12:37 p.m. in Tokyo.Australia’s S&P/ASX 200 Index lost 1.4%.South Korea’s Kospi index fell 2.3%.Hong Kong’s Hang Seng Index slid 2.9%.Shanghai Composite Index dropped 0.8%.S&P 500 futures fell 1.2%. The MSCI Asia Pacific Index lost 2.2%.CurrenciesThe yen rose 0.7% to 105.89 per dollar.The yuan fell 1.4% offshore to 7.0778 per dollar.The euro was at $1.1125, up 0.1%.BondsThe yield on 10-year Treasuries fell about seven basis points to 1.77%.CommoditiesWest Texas Intermediate crude dropped 1.1% to $55.07 a barrel.Gold rose 0.9% to $1,453.95 an ounce.To contact the reporter on this story: Andreea Papuc in Sydney at apapuc1@bloomberg.netTo contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Ravil ShirodkarFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

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