🧐 ProPicks AI October update is out now! See which stocks made the listPick Stocks with AI

GLOBAL MARKETS-Investor nerves tested with yuan, oil, Fed in play

Published 2015-12-14, 04:33 a/m
© Reuters.  GLOBAL MARKETS-Investor nerves tested with yuan, oil, Fed in play
EUR/USD
-
USD/JPY
-
UK100
-
US500
-
DJI
-
DE40
-
JP225
-
USD/CNY
-
LCO
-
US2YT=X
-
US10YT=X
-
FTEU3
-
MIAPJ0000PUS
-

* Yuan, oil at multi-year lows
* South Africa's roller coaster ride
* Historic Fed rate decision looms

By Jamie McGeever
LONDON, Dec 14 (Reuters) - Volatility swept through world
markets on Monday with China's yuan hitting a fresh multi-year
year low and oil's continued travails adding to nervousness
before an expected hike in U.S. interest rates later this week.
Asian stocks traded in the red but European stocks showed
more signs of life, recovering from their worst week in almost
four months to open this week on a positive note.
Emerging markets struggled for direction, weighed down by
the weakness in China's currency, Asian stocks and oil, but
buffeted by a surge in South African markets after Pravin
Gordhan was re-appointed finance minister.
In early trading on Monday, the FTSE EuroFirst index of
leading 300 shares .FTEU3 was up 0.6 percent at 1,406 points.
That followed last week's 3.8 percent fall, the second biggest
weekly fall this year.
Britain's FTSE 100 .FTSE was up 0.6 percent and Germany's
DAX .GDAXI was up 0.4 percent, in stark contrast to Asia,
where MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS hit a 2-1/2-month low and was last down 0.8
percent and Japan's Nikkei .N225 fell 1.8 percent.
The People's Bank of China on Monday continued guiding its
currency lower, setting the yuan/dollar official midpoint at its
weakest since July 2011.
Beijing's introduction of a yuan rate index against a basket
of peers, seen as a move traders said would depeg the renminbi
from the greenback over time, further weighed on the yuan.
Oil prices continued their freefall after the International
Energy Agency (IEA) warned that global oversupply could worsen
next year. Brent crude LCOc1 fell below $38 a barrel for the
first time in seven years on Friday and was last down 1.6
percent at $37.30, within a few cents of Friday's low.
The scattergun nature of global markets comes as the U.S.
Federal Reserve is likely to raise interest rates for the first
time in almost a decade later this week.
"Nerves are fraying ahead of the Fed's expected decision to
lift U.S. rates on Wednesday. And this might just be a foretaste
of what's to come if the market does not like what the Fed has
to say on Wednesday," said Steve Barrow, head of G10 strategy at
Standard Bank in London.
On Friday, the Dow .DJI sank 1.8 percent and the S&P 500
.SPX lost 1.9 percent. Both indices are in the red
year-to-date, on track for their first annual decline since
2008.

RETALIATION IN FIRST
Talk of so-called "currency wars" picked up again after
China's decision to loosen its grip on the yuan and allow slow
but steady depreciation in recent weeks added to concerns that
the economy may be more fragile than expected. ID:nZZN3FM900
China late on Friday launched a new trade-weighted yuan
exchange rate index. Beijing said it was intended to discourage
investors from exclusively tracking the yuan's fluctuations
against the greenback. ID:nL3N14107Q
Data on Saturday painted a slightly brighter economic
picture, however. Factory output growth accelerated to a 5-month
high, while retail sales rose at an annual 11.2 percent pace,
the strongest this year. ID:nL3N14107F
Spot yuan CNY=CFXS fell to as low as 6.4665 to the dollar,
its lowest since mid-2011, taking its losses far this year to
about 4 percent. Volatile Shanghai stocks .SSEC ended Monday
2.5 percent higher, the biggest rise since Nov. 4.
"We seem to find ourselves edging towards the next, most
worrying phase of FX Wars ... to a synchronized attempt by all
major economies to keep their currencies from appreciating, or
to guide them lower," Rabobank analysts said on Monday.
"Logically, that cannot be achieved for all of them, and if
China manages to succeed in its goals, it will mean others are
failing to do so, potentially forcing other central banks to
retaliate," they said.
South Africa's rand had been one of the biggest movers down
in recent months, in part due to investor concerns over the
country's political turmoil, particularly the instability
surrounding the position of finance minister. ID:nL8N1420VI
The rand rallied 5 percent on Monday, its biggest rise in
seven years, after the widely-respected Gordhan was reappointed.
Elsewhere in currencies, the U.S. dollar rose against major
currencies, recovering some of last week's lost ground. The euro
was down a third of one percent at $1.0950 EUR= and the dollar
was up a third of one percent against the yen at 121.20 yen
JPY= .
The greenback's rise was supported by a move up in U.S.
Treasury bond yields. The 10-year yield was up 3 basis points at
2.17 percent US10YT=RR and the 2-year yield was up 2 basis
points at 0.915 percent US2YT=RR .
A U.S. rate hike would be a first step towards normalising
monetary conditions after an extended period of loose policy,
which had helped shore up riskier assets.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.