The dollar climbed to a one-year high but stocks wobbled and metal markets buckled badly yesterday as signs that China was resorting to credit-fuelled stimulus again helped drive down its currency.
Asian shares had struggled following the moves and most of Europe was in the red as traders there banked some of the gains that had hoisted the STOXX 600, DAX and France’s CAC40 to one-month highs.
Wall Street was also expected to ease off five-month highs, while Britain’s pound was below $1.30 for the first time in 10 months as mixed retail sales figures added to constant political turmoil and Wednesday’s weak inflation data.
The yen at 113 per dollar, euro at $1.16 and most other European currencies were all weaker too. Instead of politics, though, they fell because they just couldn’t fend off the dollar’s latest charge.
That appetite had got its latest boost as S&P 500 rose to its highest in more than five months on Wednesday, the Dow Jones climbed for a fifth session and the “FAANGs” group of big tech giants hit fresh all-time highs.
Ongoing trade jitters and developments in China, however, made Asia a different picture.
Sources told Reuters that China’s central bank plans to motivate banks to expand lending to companies, a proposal that points to another shot of stimulus.
China’s foreign-exchange regulator, meanwhile, said it would keep currency markets stable amid intensifying trade frictions with the United States.
The worries had pummeled the yuan to a one-year low of 6.7800 per dollar and 6.7427 in offshore and onshore trade.
The technology-heavy Shenzhen Composite stocks index shed one per cent and Shanghai Composite index fell 0.6 per cent to head back towards a one-and-a-half-year low it had set earlier this month.
White House trade adviser Peter Navarro told CNBC yesterday that Donald Trump’s trade strategy with China was not as disruptive as many describe.
Investors remain unconvinced. Metals markets were also in the firing line again. China is the world’s biggest consumer of most industrial metals so worries about its economy can have a serious impact.
Copper and nickel were both down over two per cent on London’s metal exchange. Zinc was down more than three per cent and lead down 2.5 per cent.
Oil and gold also dropped again. Gold hit another one-year low of $1,215 per ounce, while Brent and WTI US crude futures were down 80 and 53 cents at $72.10 and $68.20 a barrel respectively.
Brent has fallen almost nine per cent from last week’s high above $79 on emerging evidence of higher production from Saudi Arabia and other members of the organisation of the Petroleum Exporting Countries as well as Russia and the United States.