August 13
Good evening everyone. After successfully soothing the markets with an extremely rare press conference, the PBOC sent global equities on a tear, with the SHCOMP ending the day up 1.76%, the SZCOMP rallying 2.2%, and Hong Kong’s HSI surging 0.53%. Japan’s Nikkei Average didn’t do too bad either, finishing the session up 0.99%. Over in Europe, the FTSE 100 climbed 0.6% at the open, the DAX jumped 1.6%, while the CAC soared 1.8%. In currencies, the embattled Malaysian ringgit, Indonesian rupiah, and Brazilian real – three of the most hard-hit currencies this week – climbed 0.3%, 0.7%, and 0.2% respectively. Safe haven bonds meanwhile, such as 10-year U.S. Treasuries and 10-year German Bunds, saw their yields rise at least 3 basis points. Here’s what else you need to know:
Tianjin explosions kill 44, wounds hundreds. Tianjin was rocked last night by two massive explosions that turned the city into a veritable inferno. 44 people reportedly died while over 500 were wounded. CNN (video), Wall Street Journal
PBOC fixes renminbi 1.1% lower, hold rare press conference. The PBOC assured the markets this morning that it will continue to assure the yuan’s stability, hinting that they’ve already accomplished what they wanted, and alluding to having enough firepower to keep it that way if needed. CNBC
Chinese steel exporters slash prices. In an effort to make themselves more competitive in the world market, steel makers in the world’s second-largest economy slashed export prices alongside the weaker yuan. Some billet producers reportedly cut prices by as much as $295 per tonne. SCMP (paywall)
Spain escapes deflation. Take that, economists. Spain’s EU harmonized inflation rate came in at 0%, above economist forecasts that the Spanish economy would slip into deflationary territory. The IMF reportedly expects the nation to grow by 3.1% this year. Financial Times
Lenovo to cut 3,200 jobs. After posting a nasty, 51% drop in net profits, Chinese personal computer giant Lenovo announced that it plans to cut expenses by $650 million for the second half of the year by axing up to 5% of its total workers. SCMP (paywall)
Japanese machinery orders sunk in June. Month-on-month machinery orders in the land of the rising sun came fell 7.9% in June – its most in over a year – raising concerns over the nation’s economic situation for the second quarter. Reuters
Malaysian GDP grows above forecast. Unfortunately, the forecast weren’t high to start with. Malaysian GDP growth came in at 4.9% – beating a 4.5% Reuters poll – but still posting it’s slowest growth since 2013. It was good enough to stem the ringgit’s fall though. The Malaysian Insider
Bank of Korea kept policy on hold. After cutting rates four times in the past year, the Bank of Korea’s monetary policy committee decided to leave the nation’s base rate unchanged at 1.5% – just as expected. Bank of Korea
Dudley concerned over yuan, but Fed remains on track. NY Fed president Bill Dudley expressed some concern over the recent lowering of the yuan, saying that while it’s too early to tell, “what is going on in China has…very significant implications for commodity prices” as well as “huge implications for the world economy.” As for the Fed’s lift-off timing, he said “I am not going to tell you when…but we are certainly getting nearer to that point.” Wall Street Journal
U.S. Treasury yields tank. Just as with German bunds yesterday, safe-haven seekers sent short-duration U.S. Treasury yields to new lows earlier this morning, with the two-year note’s yield falling two whole basis points to 0.657% – its largest two-day drop in a month – while the 10-year treasury’s yield dipped half a basis point to 2.134% – its lowest since late May. They’ve managed to climb up again though. MarketWatch
Alibaba revenue disappoints. Alibaba reported a 28% revenue increase for the second quarter, and authorized a $4 billion stock-buyback to spread over two years. The stock dropped 4.6% in premarket trading. Alibaba earnings in the first fiscal quarter were expected to drop 57% to $841 million while revenues are expected to rise 36% to $3.38 billion. Wall Street Journal, EJ Insight
Photo: groucho