Spreadex Market Update
China devalues yuan for second day in a row; investors swiftly lose their appetite for risk
Part of that surprise can be attributed, rather understandably, to China’s claim that the 2% devaluation on Tuesday was a ‘one-off depreciation’; instead the yuan was taken another 2% lower, leaving the currency at 4 year lows.
Obviously none of this was good news for the commodities, which were hardly in a strong position to begin with. The rapid fall in industrial production would have been bad enough, but the added pressure of the currency drop, something that suggests China’s economic woes are significantly worse than expected, pushed Brent Crude and copper further into fresh-low territory. With the UK’s mining stocks suffering an especially dizzying decline, the FTSE itself fell over 1% this morning, taking it back to a 2 week nadir.
The weight of the commodity drag means the UK’s fairly significant, and rate-hike relevant, jobs data might struggle to make itself heard this Wednesday. Wage growth, claimant count change and the unemployment rate are all expected to be the same-or-worse than their last set of figures, and will likely just exacerbate the FTSE’s misery as the morning goes on.
The Eurozone was no exception to the market-wide sell-off this morning, with the DAX already nearing a 200 point drop and the CAC a hair’s breadth away from 3 digit declines. It looks likely to be a second day of serious losses for the region, and news from Greece (with the country’s parliamentary committee set to discuss the third bailout ahead of a vote tomorrow) and the region’s figures (with the Eurozone’s industrial production the most notable) unlikely to calm the China-inspired storm as the day goes on.
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