While you were sleeping: China weighs on Wall Street

Thursday 13th August 2015

Wall Street was mixed, recovering from steeper losses earlier in the session, as investors reassessed the impact of China’s currency devaluation on Tuesday.

In late trading in New York, the Dow Jones Industrial Average declined 0.2 percent, the Standard & Poor’s 500 Index fell 0.1 percent. The Nasdaq Composite Index eked out a 0.1 percent gain.

In the Dow, slides in shares of JPMorgan Chase and those of Boeing, last down 2 percent and 1.6 percent respectively, outweighed gains in shares of Intel and those of Apple, last 1.6 percent and 1.4 percent stronger respectively.

Apple shares last traded at US$115.13, after sliding as low as US$109.63 earlier in the day, while Intel shares traded at US$29.45, recovering from a session low of US$28.66.

China’s concern about the slowdown in the pace of the nation’s economic growth was highlighted by Tuesday’s surprise yuan move, sparking bets the US Federal Reserve might delay an interest rate hike. Some were not so sure.

“It could have positive implications for the market because the Fed may be inclined to postpone raising rates, but I’m not sure how surprised they are by it,” Gene Peroni, a fund manager at Advisors Asset Management in Conshohocken, Pennsylvania, told Bloomberg. “Weakness in the Chinese economy didn’t come about over the weekend.”

New York Fed President William Dudley said China’s currency depreciation might “not be inappropriate.”

"Obviously if the Chinese economy is weaker than maybe what the Chinese authorities anticipated, it's probably not inappropriate for the currency to adjust in consequence to that weakness," Dudley said after a speech in Rochester, New York, Reuters reported.

"It's very early days to judge what's happening in China in terms of the changes in their currency policy,” Dudley noted. “Clearly what was happening is the Chinese yuan was appreciating along with the US dollar.”

Indeed, Ford Motor remained "very bullish" on China.

"Longer term, we're still very bullish on China," Hau Thai-Tang, head of global purchasing for Ford, said at an auto industry conference in New York, according to Reuters. If there is a "prolonged period of recessions" in China, Ford would balance supply with demand, he said, adding, "we don't see anything like that at this point.”

Shares of Alibaba sank in New York, last 4.9 percent lower, after China’s largest e-commerce company reported its most tepid quarterly revenue growth in three years.

Shares of Macy’s dropped, last 5.1 percent lower, after the company downgraded its full-year sales outlook. It also said it formed a joint venture in China, which will begin by selling products on Alibaba’s Tmall Global marketplace in late 2015.

In Europe, the Stoxx 600 Index ended the day with a 2.7 percent drop from the previous close. The UK’s FTSE 100 Index slid 1.4 percent, Germany’s DAX Index shed 3.3 percent, while France’s CAC 40 Index dropped 3.4 percent.

Aside from concern about European companies exporting to China weighing on the market, disappointing earnings including from Henkel and Delta Lloyd also hurt sentiment.

(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

No comments yet