China is the world’s second-largest economy, but its exports have dropped and some interpreted the government’s move as a last-ditch effort to boost the economy. The Dow was down as much as 277 points earlier.
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CHINA’S DEVALUATION: Beijing’s devaluation of the yuan allowed it to fall by its biggest one-day margin in a decade. Alibaba dropped $3.96, or 5.1 percent, to $73.38.
RESPONSE: “There’s a lot of uncertainty right now”, said David Joy, chief market strategist for Ameriprise Financial.
“The weaker yuan will be drag on U.S. profitability, but not a big one”.
Semiconductor maker Skyworks Solutions, which Goldman Sachs estimates receives 83 percent of its revenue from China, has seen its stock fall about 20 percent since June.
Macy’s reported a drop in quarterly profits and sales on Wednesday as the department-store chain’s results were hobbled by delayed deliveries and a strong dollar.
A second cut on Wednesday brought reductions this week in the yuan to 3.5 per cent against the dollar to its lowest level in four years.
Yet Robert Crosby, portfolio manager of the $6.3 billion Victory Munder Mid-Cap Core Growth Fund, said he would be more inclined to add to his holdings of the stock than sell it.
In Europe, the FTSE 100 index of leading British shares was up 0.7 percent at 6,618 while Germany’s DAX rose 1.9 percent to 11,136.
China’s government said the devaluation of the yuan was part of reforms meant to make its exchange rate more market-oriented. In recent months, the yuan has strengthened along with the U.S. dollar as currencies of other developing countries weakened, hurting Chinese exporters. Many investors considered the devaluation a sign that the country’s economic growth is much worse than official reports suggest. Brands and Tiffany each dropped 4 percent.
THE QUOTE: “Markets were not expecting any major moves on the currency from the Chinese government, despite its benefits, as the risks were perceived as too high”.
Credit rating agency Standard & Poor’s has praised China’s devaluation of its currency and said the move did not threaten a currency war.
ASIA’S SCORECARD: Major Asian benchmarks finished higher after a two-day slump. It has dropped a total of 2.9 percent since Tuesday. South Korea’s Kospi lost 0.6 percent and Australia’s S&P/ASX 200 slipped 1.7 percent. The Shanghai Composite Index fell 1.1 percent to 3,886.32, and shares in Southeast Asia were also lower.
ENERGY: Benchmark U.S. crude fell $1.89 to $43.07 per barrel on the New York Mercantile Exchange.
In other markets, U.S. government bond prices edged down, nudging the yield on the 10-year Treasury to 2.15 percent from 2.14 percent the day before.
CURRENCIES: The dollar rose to 124.44 yen from 124.26 yen in late trading Wednesday.
METALS: Precious and industrial metals futures ended broadly higher, following a slump the day before.
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But stocks rebounded strongly by mid-afternoon, led by Apple’s 1.4% rise that helped the Dow reverse course.
