LONDON, Aug 8 — Stock markets enjoyed a tentative recovery today after better-than-expected Chinese export data and a steadying of the yuan restored some calm to global markets.
European markets followed Asia higher in early trade, helped by data showing Chinese exports rose 3.3 per cent in July from a year earlier, beating an expected decline of 2 per cent. Chinese imports fell by less than forecast, despite the Sino-US tariff struggle.
China moved on Monday to allow the yuan to weaken beyond 7 yuan per dollar, after US President Donald Trump said he would impose more tariffs on Chinese imports. That sent markets into a tailspin.
Investors fear the trade conflict between the world’s two biggest economies will cause a global recession. Bond markets have flashed red and a closely watched US recession indicator reached its highest level since March 2007.
Today, the pan-European Euro STOXX 600 rose 0.87 per cent. Germany’s DAX was up 0.84 per cent and France’s CAC 40 1.03 per cent.
The MSCI world equity index, which tracks shares in 47 countries, rose 0.25 per cent. It remains down more than 3 per cent since the start of August.
“There’s a little bit of calm back in the market at the moment,” said Peter Kinsella, global head of FX strategy at UBP. “But the ball is very much in Trump’s court.”
Wall Street recovered earlier losses yesterday and finished the day higher. E-Mini futures for the S&P 500 gained 0.34 per cent, suggesting it would build on that recovery today.
Recession fears
Investors ran for the safety of bonds this week as fears of a recession grew.
Yields on US 30-year bonds fell as low as 2.123 per cent overnight, not far from a record low of 2.089 per cent set in 2016. Ten-year yields dropped further below three-month rates, an inversion that has reliably predicted recessions in the past.
The latest spasm began when central banks in New Zealand, India and Thailand surprised markets yesterday with aggressive interest rate cuts.
“Financial markets are raising risks of recession,” said JPMorgan economist Joseph Lupton. “Equities continue to slide and volatility has spiked, but the alarm bell is loudest in rates markets, where the yield curve inverted the most since just before the start of the financial crisis.”
Markets have ramped up their expectations for more easing by the US Federal Reserve, but the question remains how fast Fed policymakers will move.
Futures moved to price in a 100 per cent probability of a Fed cut in September and a near 24 per cent chance of a half-point cut. Some 75 basis points of easing is implied by January, with rates ultimately reaching 1 per cent.
European and US government bond yields rose today, with German and French 10-year yields up from record lows after a rally in recent sessions.
The 10-year US Treasury yield rose to 1.7155 per cent from as low as 1.595 per cent yesterday.
Gold also benefited this week as investors scrambled to find somewhere safe to park their cash, rising above US$1,500 (RM6,309) for the first time since 2013. Spot gold was last at US$1,498 per ounce, down from as much as US$1,510 yesterday. Gold is up 16 per cent since May.
In foreign exchange markets, the Japanese yen rose again, gaining 0.2 per cent to 106.04 yen per dollar. The yen tends to gain at times of uncertainty, and its rise this week underlined investor fears.
China’s yuan also gained. In the offshore market it rose 0.2 per cent to 7.07 yuan per dollar after touching as high as 7.14 yuan on Tuesday.
The dollar slipped, losing 0.2 per cent against the euro to US$1.1223 .
Oil prices regained some ground amid talk that Saudi Arabia was weighing options to halt its decline, offsetting an increase in stockpiles and fears of slowing demand.
Brent crude futures climbed US$1.25 to US$57.48, though that followed steep losses yesterday, US crude rose US$1.46 to US$52.53 a barrel. — Reuters
