China: Stocks take a big hit but not alone this time

After some stabilisation, Chinese stocks took a big hit overnight, falling 5% to the lowest level in more than two years. However, in contrast with the declines earlier this year, this was part of a global sell-off that included the US market. The sharp market fall was driven by the tech sector and centred on tech. The share price of China’s biggest tech company Tencent is down more than 40% from the peak in January.
The downward pressure on the CNY continued after China cut the Reserve Requirement Ratio for the third time this year. We expect the trend of a weaker CNY to continue and USD/CNY to hit 7.20 in 12 months. However, we doubt the US will label China as a currency manipulator in its report next week.
Bond yields and rates have been broadly stable lately.

Allan von Mehren Danske Bank A/S

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Allan von Mehren

Danske Bank A/S

EUR/USD turns negative near 1.1850

EUR/USD has given up its earlier intraday gains on Thursday and is now struggling to hold above the 1.1850 area. The US Dollar is finding renewed support from a pick-up in risk aversion, while fresh market chatter suggesting Russia could be considering a return to the US Dollar system is also lending the Greenback an extra boost.

GBP/USD change course, nears 1.3600

GBP/USD gives away its daily gains and recedes toward the low-1.3600s on Thursday. Indeed, Cable now struggles to regain some upside traction on the back of the sudden bout of buying interest in the Greenback. In the meantime, investors continue to assess a string of underwhelming UK data releases released earlier in the day.