The further decline of the yuan is plunging markets – Les Echos

Markets do not like surprises. The news of a reduction by 2% on Tuesday, during the pivot around which the yuan was trading had already been taken coolly, causing a sharp decline in world stock markets. But while the authorities had bothered to indicate that it was a simple one-off correction, the Chinese currency has further plunged Wednesday to its lowest level since August 2011.

European markets reacted immediately and dug their decline sometime in the afternoon Wednesday, approaching their strongest daily drop since October. The Stoxx Europe 600 index thus lost 2.84% to 16.30, against -1.55% yesterday. After a first withdrawal of 1.86% Tuesday, the CAC 40 lost 3.6% to 16.30. The same applies to the DAX, the index of the Frankfurt Stock Exchange, which showed a fall of 3.26% after dropping 2.68% yesterday. More moderate, the London Stock Exchange yielded -1.63% over Tuesday (-1.06%)

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The evolution of the Chinese currency rise indeed real questions from investors. “ The fact that this decline will continue raises two issues of concern: until when the yuan will he continue to fall and -especially – that implies that policy on Chinese growth? , “says Christian Parisot at Aurel BGC. Indeed, while analysts had relied almost until today the hypothesis of an increase of Chinese GDP around 7% officially announced by the government, they now fear that the latter is much lower.

From the Wall Street side also opened down, the Dow and the Nasdaq lost 1.17%. In addition to the growth prospects worse than expected, affecting companies heavily exposed to China, as Apple (-1.89%), the rise of the dollar, caused by the devaluation of the Chinese currency market fears an increase in profit warnings.

Finally emerging markets also face the repercussions of the fall of the yuan, including funds for fear of an aggressive exchange rate policy of the Chinese authorities. The MSCI Emerging Markets Index lost 1.4% and … more than the CSI 300, the composite index of Shanghai and Shenzhen which fell only 1.2%

Guillaume Benoit