Stocks, yields stumble after China lets yuan fall again
By David Gaffen
NEW YORK (Reuters) - Stocks, the U.S. dollar, and emerging market currencies around the world remained under pressure for a second day on Wednesday after China's yuan weakened again, a day after the country devalued its currency.
Major Wall Street averages pared losses by late afternoon, however, as Apple and energy shares reversed direction to trade higher.
On Wednesday, the People's Bank of China (PBOC) set the yuan's midpoint rate CNY=SAEC lower than Tuesday's closing market rate, resulting in nearly a 4.0 percent devaluation of the yuan in two days against the U.S. dollar.
Shares in China dropped 1 percent overnight, and equity markets around the world dropped as well. Sectors exposed to China's economy fell the most, as a lower yuan makes exports to China from the rest of the world more expensive.
“China is still a big unknown, and the market is pricing in the worst” scenario, said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.
The yuan's spot value CNY=CFXS fell further after Beijing released weak July output and investment data, trading as low as 6.4510 to the dollar.
Sources told Reuters that the move to devalue the yuan reflects a growing clamor within Chinese government circles for a devaluation of perhaps up to 10 percent to help struggling exporters. Continued...