China steps up yuan defense, buying the currency in Hong Kong Crude rebounds from 12-year low; bonds drop on supply Share on Facebook Share on Twitter U.S. and European stocks rose as commodities and the currencies of nations that produce raw materials pared declines and China stepped up its defense of the yuan. The Standard & Poor’s 500 Index climbed for a second day, as technology and health-care companies led gains. Automakers led the advance in the Stoxx Europe 600 Index. The yen and euro erased gains, while European bonds fell amid government debt sales. China’s yuan traded in Hong Kong erased its discount to the onshore rate as the state sought to ward off speculators. China stepped up its defense of the yuan on Tuesday, sparking a record surge in Hong Kong’s money-market rates to deter bearish bets and helping to stabilize equity markets. Concern that turmoil in the nation’s stocks and currency would spread had helped spur declines in financial markets this year, pushing crude 16 percent lower since Dec. 31, and leaving a global equity gauge on course for its lowest close since 2013. “This rebound could be a sign that global markets are calming down a little,� said Pedro Ricardo Santos, a broker at X-Trade Brokers DM SA in Lisbon. “We expect to see a recovery for equities this week, though we’re not yet talking about a strong rally from here. Concerns about commodities prices will persist, and pressure on those sectors continues to be very high.� Stocks The S&P 500 added 0.9 percent at 9:35 a.m. New York time. The benchmark ended its last session up 0.1 percent following a tumultuous trading session. The main U.S. equity benchmark’s tumble to start 2016 has left it 9.7 percent below its all-time high set in May. It is 3 percent above the bottom of an August swoon which was also sparked by anxiety over the impact of China’s weakness on worldwide growth. Investors will also be turning attention to corporate earnings, after Alcoa Inc. unofficially kicked off earnings season yesterday. The aluminum producer fell 3.1 percent today. In Europe, Germany’s DAX Index, which relies heavily on exporters including carmakers, posted the best performance among western-European markets today, rebounding 2.3 percent and paring its loss this year to 6.4 percent. The MSCI All-Country World gauge added 0.6 percent, halting a six day decline. Emerging Markets The Shanghai Composite Index rose 0.2 percent after dropping below the 3,000 level for the first time since September. The gauge sank 5.3 percent on Monday, even after state-controlled funds intervened in the market last week. The yuan traded in Hong Kong temporarily erased a gap with the Shanghai exchange rate that widened to a record 2.9 percent last week. The People’s Bank of China repeatedly intervened in the offshore market on Tuesday, according to people familiar with the matter, following efforts to talk up the currency from two senior government officials on Monday. The cost of borrowing China’s currency overnight in Hong Kong’s interbank market jumped by 53 percentage points to 66.82 percent, more than five times the previous record reached on Monday. Comparable rates with tenors of up to a year all surged by records to unprecedented levels. Commodities The Bloomberg Commodity Index, a measure of returns for 22 raw materials, was 0.2 percent lower, paring an earlier loss of as much as 1 percent. West Texas Intermediate oil rose 0.9 percent to $31.70 a barrel after falling to the lowest level since December 2003. Contracts on Brent crude climbed 2 percent to $32.17 in London, after earlier dropping as much as 3.6 percent. Currencies The New Zealand dollar slipped about 0.2 percent, while Australia’s currency erased a drop of as much as 0.8 percent. Britain’s pound fell against all its major counterparts after data showed U.K. industrial production unexpectedly contracted in November. Bonds The 10-year Treasury yield decreased by one basis point to 2.17 percent before an auction of three-year notes. Government bonds fell in Europe as at least four euro-area nations held debt sales. Portuguese bonds led the slide in European debt, with the 10-year yield climbing four basis points to 2.68 percent. The yield on German 10-year bunds, the region’s benchmark security, rose two basis points to 0.56 percent. The cost of insuring corporate debt declined. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies fell to 85 basis points, slipping from the highest on a closing basis since Oct. 6. The non-investment grade Markit iTraxx Europe Crossover Index also retreated.

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