Daily Scan: PBOC wreaks havoc in the currency markets; Equities worldwide set to fall

    Shanghai, China

    August 11

    Good evening everyone. The PBOC’s surprise devaluation seems to have investors rattled at the moment with S&P minis falling 0.4%, FTSE 100 futures dropping 0.5%, and DAX 30 contracts slipping 1.2%. The Chinese markets had some trouble digesting the news as well, with Shanghai ending the session essentially flat at 3,927.91, while Shenzhen managed to rally 1.4%. Hong Kong’s Hang Seng Index meanwhile fell 0.09%, while over in Japan, the Nikkei Average slumped 0.42%. The move’s biggest impact seemed to be in the currency markets, with the Malaysian ringgit and the Indonesian rupiah hitting Asia crisis lows against the U.S. dollar. The Singaporean dollar also tanked to its five-year low versus the greenback, while the Japanese yen saw itself plunge to 125.08 – a two-month low for the currency – against the USD. Here’s what else you need to know:

    Greece struck a deal! It wasn’t all bad news today. Greece struck an outline deal with its creditors today, saying that there’s just “one or two items” that needed to be polished. Germany however, remains “cautious” over the accord. Financial Times (paywall)

    PBOC devalues the renminbi. In case you missed it, the PBOC slashed the daily renminbi-dollar fix by 1.86% – its largest cut on record – following a slew of less than rosy economic data hailing from the region. The central bank said that this is just a one-time adjustment, though several market participants seem to be unsure about that statement’s credibility, among others. PBOC 

    Gold hits three-week high. Here’s something you won’t see every day. As the mighty greenback mightily climbs higher against its trading pairs, gold – an inversely correlated asset – also soared 1.1% to $1,119 – a three-week high for the yellow metal. Financial Times (paywall)

    Veggies… in space! Marking one small munch for man and a giant leap for agriculture, astronauts onboard the international space station are about to eat red lettuce grown and harvested in space. Quartz

    China’s new yuan loans beat forecasts. Margin loans may have declined but new yuan loans in the world’s second-largest economy surged to 1.48 trillion yuan in July, nearly twice the 738.0 billion yuan reading forecast by economists. The PBOC claims that this was due to “steady growth policy, demand for working capital, a real estate rebound and local government debt swaps.” Straits Times

    Australian business confidence slips. The National Australia Bank’s business confidence index came in at 4 for July, its lowest level since April, and four points below June’s 8 reading, which was revised downwards from 10. Mining and construction companies – most of them hopelessly exposed to China – apparently dragged the index down. The Australian

    Singapore revises GDP forecast downwards. Not exactly my idea of wrapping up a party. After seeing the nation celebrate its 50th year, Singapore’s Ministry of Trade and Industry downgraded its 2015 growth forecast from 2-4% to around 2-2.5%, citing China’s weak outlook among several reasons for the move. Financial Times (paywall)

    Crude oil rebounds. With the DXY dollar index slipping to a near two-week low, oil prices staged one mighty comeback with Brent soaring 3.7% and West Texas Intermediate jumping more than 2.3%. A malfunction at BP’s Whiting, Indiana refinery meanwhile sent gasoline prices blitzing over 4%. Reuters

    Google launches parent company. Google is starting Alphabet, a new parent company for Google and “a collection of companies.” Larry Page will be running Alphabet and Sundar Pichai will become CEO of Google. Alphabet will replace Google as the publicly traded entity. Wall Street Journal

    Atlanta Fed president says interest rate rise is “close.” Fed President Dennis Lockhart told the Atlanta Press Club in a speech Monday “the point of liftoff is close.” Hikes should be gradual, but more frequent than every other meeting. Reuters

    Fed vice chairman however says September not a guarantee. Federal Reserve vice chairman Stanley Fischer hinted Monday that interest rates may not rise in September. Fischer said he still wants to see inflation and employment at “more normal levels.”  “Not everything is rosy and the Fed still has a lot of data to parse over the next five weeks before the next Fed meeting,” he said. MarketWatch

    U.S. Treasury markets brush off China’s selling. Despite seeing Beijing dump $180 billion worth of U.S. treasurys over the past year, treasury yields remain unswayed as banks and bank-like firms step in to fill the void. SCMP (paywall)

    Photo: Dennis Jarvis