NY: Wall St. Declines After China Devalues Its Currency
Stocks opened lower on Tuesday, led by declines in energy and materials stocks as commodities prices drop. Prices for oil and copper fell sharply after China’s government lowered the value of its currency. Trade has been weakening in China, and investors are seeing the government’s move to weaken its currency as a sign of sluggishness in China’s economy.
KEEPING SCORE The Dow Jones industrial average 1 percent, and the Standard & Poor’s 500-stock index lost 0.77 percent. The Nasdaq declined 0.54 percent.
EUROPEAN MARKETS France’s CAC-40 fell 1.1 percent, and Germany’s DAX lost 1.6 percent. Britain’s FTSE 100 shed 0.7 percent.
CHINA’S DEVALUATION Beijing’s devaluation of the yuan allowed it to fall by its biggest one-day margin in a decade. The central bank said the 1.9 percent fall was because of changes aimed at making the way it sets exchange rates more market-oriented. In recent months, the yuan has strengthened along with the dollar as currencies of other developing countries weakened, hurting Chinese exporters. Exports fell by an unexpectedly large 8.3 percent in July. The People’s Bank of China said market forces would be given a bigger role in setting the exchange rate, leaving open the possibility of more declines.
ASIA’S DAY Tokyo’s Nikkei 225 lost 0.4 percent, and Seoul’s Kospi was off 0.8 percent. The Shanghai Composite Index ended little changed, and Hong Kong’s Hang Seng declined 0.1 percent. Sydney’s S&P/ASX 200 lost 0.7 percent, and India’s Sensex shed 0.7 percent. Singapore, Bangkok and Jakarta also retreated.
THE QUOTE China’s yuan announcement “looks to be a move to a more open market policy,” said Stephen Innes, senior trader at OANDA. “Traders are looking for U.S. dollar strength across the Asia region and pressure on all local currencies,” he said. “The market is extremely volatile at moment.”
GREECE DEAL Greece says it has reached an agreement with its international creditors on the broad terms of a new bailout deal. The news pushed up Greek markets, with the stock index up 2 percent and the 2-year bond yield sliding more than 4 percentage points — an indication investors are less worried about a default. Officials expect the deal to be finalized Tuesday.
ENERGY Benchmark United States crude oil fell 80 cents to $44.16 a barrel in electronic trading on the New York Mercantile Exchange. The contract jumped $1.09 to $44.96 on Monday.
CURRENCIES AND BONDS Bond prices rose. The yield on the benchmark 10-year note fell to 2.16 percent. The dollar gained to 124.95 yen from 124.55 yen on Monday. The dollar also gained against a raft of Asian currencies including a 0.5 percent rise against the Indian rupee and a 1.8 percent jump against the South Korean won. The Australian dollar sank 1.3 percent to $0.7321. The euro rose to $1.1037 from $1.1021.
