Asian shares rally despite yuan fall on account of comforting trade data

IC Markets Market Review
IC Markets Market Review

Global Markets:

  • Asian Stock Markets : Nikkei up 0.37%, Shanghai Composite up 1.01%, Hang Seng up 0.67%, ASX up 0.75%
  • Commodities: Gold at $1511.45 (-0.54%), Silver at $17.12 (-0.43%), Brent Oil at $57.81 (+2.81%), WTI Oil at $52.72 (+3.19%)
  • Rates : US 10-year yield at 1.736, UK 10-year yield at 0.479, Germany 10-year yield at -0.562

News & Data:

  • (USD) Consumer Credit m/m 14.6B vs 16.4B expected
  • (USD) 10-y Bond Auction 1.67|2.2 vs 2.06|2.4 previous
  • (USD) Crude Oil Inventories 2.4M vs -2.9M expected
  • (CAD) Ivey PMI 54.2 vs 52.7 expected
  • (GBP) Halifax HPI m/m -0.20% vs 0.30% expected
  • (CHF) Foreign Currency Reserves 768B vs 760B previous
  • (EUR) French Trade Balance -5.19B vs -4.0B expected
  • (EUR) German Industrial Production m/m -1.50% vs -0.50% expected
  • (NZD) Official Cash Rate 1.00% vs 1.25% expected
  • (AUD) Home Loans m/m -0.90% vs 0.60% expected
  • (GBP) RICS House Price Balance -9.00% vs -1.00% expected
  • (JPY) Bank Lending y/y 2.30% vs 2.40% expected
  • (JPY) Current Account 1.94T vs 1.76T expected
  • (CNY) Trade Balance 310B vs 310B expected
  • (CNY) USD-Denominated Trade Balance 45.1B vs 43.2B expected
  • (JPY) Economy Watchers Sentiment 41.2 vs 44 previous
  • Global growth fears support yen, Australia and NZ dollars pare losses
  • PBOC Sets Yuan Mid-Point At 7.0039 Against The Dollar

Markets Update:

Asian markets rose in early trading Thursday, showing no significant reaction after China’s central bank set the yuan’s midpoint at its weakest level since 2008. The People’s Bank of China early Thursday set the yuan’s reference point at 7.0039 against one U.S. dollar. Still, it was not as weak as some had expected, heartening investors that China was not trying to start an all-out currency war.

The yuan fell for three days consecutively, but investors were encouraged by Chinese central bank promises the decline wouldn’t continue and the exchange rate would be kept stable.  Later, China posted better-then-expected trade data despite the ongoing trade war with the U.S., leading to shares recovering.

Japan’s Nikkei edged up 0.37%, and away from seven-month lows, while Australian shares climbed u 0.75%. Hang Seng and Shanghai Composite gained 0.67% and 1% as China posts better-than-expected trade data. Asian shares finally recovered from the recent falls as Chinese exports rose 3.3% in July from a year earlier, when analysts had looked for a fall of 2%. Imports also declined by less than expected, suggesting some resilience to the drawn-out Sino-U.S. tariff war.

Yields on U.S. 30-year bonds dived as deep as 2.123% overnight, not far from an all-time low of 2.089% set in 2016. Ten-year yields dropped further below three-month rates, an inversion that has reliably predicted recessions in the past. The euro has also bounced to $1.1210, from a two-year trough of $1.1025, while the U.S. dollar index has backtracked to 97.523, from a recent peak of 98.932. The rapid decline in yields helped lift gold above $1,500 for the first time since 2013. The precious metal is up 16% since May.

Oil prices regained some ground as talk that Saudi Arabia was mulling options to halt crude’s descent helped offset a build in stockpiles and fears of slowing demand. Brent crude futures climbed $1.53 to $57.81, though that followed steep losses on Wednesday, while U.S. crude rose $1.50 to $52.72 a barrel.

Upcoming Events:

  • 8:00 am GMT – (EUR) ECB Economic Bulletin
  • 8th-14th GMT – (CNY) New Loans
  • 8th-14th GMT – (CNY) M2 Money Supply y/y
  • 12:30 pm GMT – (CAD) NHPI m/m
  • 12:30 pm GMT – (USD) Unemployment Claims
  • 2:00 pm GMT – (USD) Final Wholesale Inventories m/m
  • 2:30 pm GMT – (USD) Natural Gas Storage
  • 5:01 pm GMT – (USD) 30-y Bond Auction
  • 10:45 pm GMT – (NZD) Visitor Arrivals m/m
  • 11:30 pm GMT – (AUD) RBA Gov Lowe Speaks
  • 11:50 pm GMT – (JPY) M2 Money Stock y/y
  • 11:50 pm GMT – (JPY) Prelim GDP Price Index y/y
  • 11:50 pm GMT – (JPY) Prelim GDP q/q
  • &more…

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