China devalued the yuan still heavy Bags: oil collapses – The Republic

Milan – 10:45. China floored the markets of the Old Continent. Surprisingly Beijing has devalued the yuan again, after a first cut of the currency – completely unexpected – took place yesterday: in essence, the Chinese central bank has cut the exchange rate against the dollar by more than 3.5%. It continues the currency war: the immediate reaction of European markets after the collapse of the eve reopen the session dedicated sales: Milan Stock Exchange lost 2.2%, London 1.2%, 2% and Frankfurt Paris 2.2%. Last night on Wall Street the Dow Jones lost 1.21%, erasing much of the gains on Monday.

And while the protests are raised by the Western world for the series of unilateral actions of Beijing, the Chinese government justification explaining the need to intervene in support of the country’s economic recovery. On the other hand, the manufacturing industry is showing signs of slowing down (+ 6% in July, below estimates) as exports and retail sales grew by “only” 10.5%. A thesis married even the International Monetary Fund that greeted positively the double devaluation of the yuan by defining the operation as an alignment to markets around the world.

There is great tension, especially in the luxury market and the fashion in which Italy is the protagonist than the economic policy of China: Beijing had, in fact, announced plans to help the transition from an economy tied to exports sustained by domestic consumption, a strategy that seems now again changed. According to the IMF, however, greater flexibility in the rates – that were anchored to the dollar – will enable Beijing rapid “integration into global financial markets.” To be affected are also the raw material: it does not stop the fall in oil prices since China is the second largest importer, but the currency weak against the dollar is likely to reduce its purchases: WTI crude oil yields 0, 5% to $ 42.89 after yesterday had slid by more than 4% by touching the lowest level in six years. New fall for gold: bullion for immediate delivery to down 0.4% to $ 1,103 an ounce. “The situation will stabilize,” says the Central Bank, but many economists fear of triggering a domino effect.

And this leads some analysts to believe that the Federal Reserve now has a good reason not to start raise US interest rates – for the first time since 2006 – at its meeting next month. Others point out, however, as the US central bank is more focused on the US labor market and after the employment report for July in line with estimates, will be critical to August, which will come just a few weeks before the meeting of 16 and Sept. 17.

The euro for now remains at the window and share above 1.10 against the dollar, while fall to its lowest in six years the Australian dollar and the New Zealand. Weak coins from Indonesia and Malaysia. Proving that the currency war – at least for the moment – mainly affects Asia and Oceania (including Vietnam has devalued the dong to avoid losing competitiveness against China). The single European currency is changing hands at $ 1.1087.

No reaction, instead, on Italian government bonds that prefer to focus on the agreement between Greece and international creditors by next week that could unlock the new aid plan of 86 billion Euros: the spread is stable at 115 basis points area, but the ten-year BTPs on the secondary market make 1.75% to its lowest since early May.

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