China markets swing wildly on growth, trade uncertainty

06 July, 2018, 01:48 | Author: Mary Valdez
  • A local investor looks at the electronic

Stocks sank in morning trade as Beijing and Washington hurtled towards an end-of-week tariff deadline that has kept investors in China nervous, although they recouped their losses and ended the day in positive territory.

TOKYO, July 4 (Reuters) - Major currencies marked time on Wednesday while the Chinese yuan recovered from 11-month lows, after efforts by authorities the previous day to calm financial markets which had been rattled by worries about trade wars.

The risk aversion selloff triggered across the board, with forty-seven of the 50 blue-chip stocks fell as Chinese currency took another beating, with traders gripped by fears of an all-out trade war of China with the United States, and anxious about the dimming outlook for the Chinese economy.

"It's not clear yet if the trade row will derail the global economy as a whole but it's already clear that it will harm Chinese companies at least", said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

"Both the euro and the dollar benefit because both are seen as safe havens". Europe's tech and energy sectors rose 0.5 and 1 percent respectively. Euro zone business survey data is due at 0800 GMT.

The yuan fell 3.25 per cent against the dollar in June and continued its slide despite a firmer-than-expected midpoint set by the central bank on Monday. USA tariffs on $34 billion of Chinese products are expected to take effect on July 6, with China set to retaliate with duties of its own on the same value of American goods.

China is not using yuan depreciation as a tool in its trade conflict with the US, and will likely step in to avert any disorderly decline, according to Morgan Stanley.

The recent drop also coincided with weakening in Chinese economic data, and moves by the PBOC to shore up bank lending as a counter to regulators' crackdown on shadow banking.

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In the United States, the Dow Jones Industrial Average rose 88.76 points, or 0.37 percent, to 24,395.94, the S&P 500 gained 7.04 points, or 0.26 percent, to 2,733.75 and the Nasdaq Composite added 2.71 points, or 0.04 percent, to 7,570.40.

The central bank put the midpoint roughly in line with market expectations at 6.6497 yuan per dollar, its weakest level in about 10 months, setting the stage for the day's drop.

China's central bank moved to calm jittery financial markets yesterday after the yuan fell through the psychologically significant 6.7 to the USA dollar mark, hitting its lowest in nearly a year as anxieties over U.S. trade frictions deepened.

"Recently the foreign exchange market has shown some volatility and we're paying close attention to that", Yi said in a statement responding to a request by the China Securities Journal posted on the central bank's website.

Cross-border capital flows were under control, he added.

Elsewhere the Australian dollar took heart from solid domestic retail sales data and edged up to $0.7403, moving away from an 18-month trough around $0.7311.

But traders think the respite in the currency may only be temporary, and remain very bearish amid the trade tensions and waning Chinese growth momentum. Visit MarketWatch.com for more information on this news.

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