Thursday’s stock market crash can essentially be labelled a currency panic, as the unexplained lowering of the yuan has shaken investor confidence. The securities market regulator abandoned the circuit breaker after plunges of 7% in the CSI 300 triggered automatic trading halts on Monday and Thursday in its first week.
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“We’ve had a stabilisation in China overnight, but the question remains as to whether China’s economy is headed for a hard or soft landing”, said Richard McGuire, senior fixed income strategist at Rabobank.
Accelerated depreciation of the CNY guided by lower PBoC fixes has rattled investor confidence, raising concerns of a more than expected weakness in China. The yen rose 0.7% against the greenback at 117.65 on Thursday.
“A more severe period of global risk aversion is likely to weigh on commodity and emerging-market currencies, further strengthening the yen near term”, Greg Gibbs, director of Amplifying Global FX Capital, said.
Global oil benchmark Brent gained 0.5 percent at $34.40 a barrel and WTI gained less than 0.1 percent to $33.99 a barrel.
Markets in China rose Friday after Thursday’s sharp falls though prices fluctuated throughout the day, with sentiment still brittle following this week’s drop in the value of the Chinese yuan.
Oddly, the euro was one of the few to outperform the safe-haven yen on Thursday, bouncing to 128.50 from an 8-1/2 month trough of 126.79.
But the dollar slipped against the Japanese yen, which is considered a go-to currency in times of turmoil and uncertainty. With the U.S. dollar continuing its strong rise, “one could argue that the manipulators have had no need to manipulate”, C. Fred Bergsten, former head of the Peterson Institute for International Economics, said at the forum convened by the U.S. House of Representatives’ tax and trade committee.
That news put fresh pressure on many Apple suppliers in Asia, although the immediate focus is on the Chinese yuan and Chinese shares.
Weak Chinese manufacturing data and tension in the Middle East gave the yen early strength, and it received another thrust as the People’s Bank of China devalued the yuan by more than 0.5 per cent.
South32 was up 1.7 per cent, although that does not make up much of yesterday’s 7.6 per cent rout.
The Standard & Poor’s 500 Index stopped a selloff that has erased $4 trillion from global equities this year as Chinese authorities set a higher yuan reference rate and intervened in its equities markets. China’s central bank started on Tuesday to sharply weaken its currency, spurring speculation it was aiming for a sustained depreciation to help boost exports. That extended losses for the week to seven per cent, the biggest weekly decline in four months.
The market fell almost 2 percent more in just one minute after trading resumed and then was closed for the day.
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After the US market close, two Apple suppliers added to growing worries about slowing shipments of iPhone 6S and 6S Plus by cutting their revenue estimates for the third quarter.
