Equities on world bourses were on track to end the week mostly lower at midsession yesterday, after China’s surprise currency devaluation on Tuesday.

US stock indexes were little changed for the session, bond yields were slightly higher and the US dollar was mixed as the investors pondered the meaning of China’s modest devaluation of its currency which is now down about three per cent for the week.

“The engineered part of the devaluation seems to be over, but since market forces are meant to play a larger role, the yuan would drift lower,” wrote analysts at Brown Brothers Harriman. “What we know is that the [People’s Bank of China] will continue to manage the currency closely.”

For the week, the MSCI All World Index is down 0.6 per cent, on track for its second consecutive weekly decline.

Crude oil prices slumped to the lowest since March 2009, and emerging market currencies slid to historic lows, with the Turkish lira and South African rand in the spotlight, as investors headed for the safety of developed world economies.

The People’s Bank of China set its midpoint yuan rate at 6.3975 per dollar before the market opened yesterday, slightly higher than the previous day’s close of 6.3990. The yuan also strengthened in spot market trading, changing hands at 6.3918.

The impact from slower growth in China will likely be largely offset by robust demand from the US and the UK

“We just need to see if the yuan is going to stay halfway stable over the next few days, then confidence is going to come back,” said Markus Huber, senior equity sales trader at Peregrine & Black.

European stocks were on track for their worst week in six after exporting companies with exposure to China saw their stocks fall after the yuan was devalued. The FTSEurofirst 300 index of leading European shares was down 0.1 per cent.

The Euro STOXX 50 traded down 0.6 per cent.

Economic growth in the eurozone slowed in the second quarter as France stagnated and Italy lost momentum, held back by an uncertain global outlook that is even weakening investment in powerhouse Germany.

“The impact from slower growth in China will likely be largely offset by robust demand from the US and the UK,” said Holger Schmieding at Berenberg bank. Yesterday, the Greek Parliament voted to approve the country’s third financial rescue by foreign creditors in five years.

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