The slowing economy contributed to weakness throughout 2015 in China’s currency, which was weaker again on Wednesday after the People’s Bank of China unexpectedly fixed the midpoint rate at 6.5314 per dollar prior to the market open, even weaker than the previous day’s closing quote 6.5157.
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“Given that a spike in risk aversion forced the Fed to temporarily change tack and delay lift-off last September, the question for some investors now is whether a similar development could deal a blow to the Dollars decoupling trade”, Credit Agricole analysts said in a morning note.
Energy stocks continued to decline, as drilling services company Transocean lost 26 cents, or 2.4 percent, to $10.74 and Marathon Oil fell 25 cents, or 2.3 percent, to $10.42. The FTSE 100 index of leading British shares declined 0.7 percent while Germany’s DAX lost 1.3 percent.
JOBS REPORT: The Labor Department said the USA employers added 292,000 jobs in December. The CAC-40 in France slid 1.6 percent.
However, nearly immediately after the yuan was admitted into the International Monetary Fund’s currency reserve basket in November, the rate of devaluation has been allowed to accelerate, losing around 2.5 percent since. Their holiday sales have been hurt by the unusually warm winter weather. The sluggishness included its Old Navy brand, which had been a bright spot for Gap.
Calm returned Friday to China’s stock markets after a torrid week but underlying reasons for the turmoil remain: a weakening yuan and perceptions China’s leaders are bungling their handling of the economy.
The Standard & Poor’s 500 index rose 11 points, or 0.6 percent, to 1,953.
Under the mechanism that became effective on January 1 to tame the wildly fluctuating Chinese stock market, trading will be halted for 15 minutes if the Hushen 300 Index, which reflects the performance of bluechips listed in Shanghai and Shenzhen, moves up or down by 5 percent before 2:45 p.m. If the movement reaches 7 percent when trading is resumed, the market closes for the day. The stock dropped $3.36, or 12.6 percent, to $23.38.
The yuan’s tumble this week on both onshore and offshore markets has sent currency investors scrambling for traditional safe havens like the yen, Swiss franc and to a lesser extent the euro. Those fears have drowned out signs that the USA and Europe are doing fairly well.
CONTAINER STORE STUMBLE: The Container Store reported a surprise third-quarter loss and disappointing sales, and its stock plunged $2.98, or 41.5 percent, to $4.20.
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Sources told Reuters that China’s central bank is under increasing pressure from policy advisers to let the yuan fall quickly and sharply, potentially by another 10-15 percent.
