Markets fall as China devalues yuan - 12.8.2015

US stocks retreated on Tuesday on concerns over the negative impact of China’s 1.9% yuan devaluation on US economy. The dollar strengthened, with the ICE US Dollar Index, a measure of the dollar’s strength against a basket of six currencies, rising 0.2%. The S&P 500fell 1% closing at 2084.07, led by losses in the materials sector, which declined 1.9%. Shares of exporters and makers of luxury goods sold off. Apple plunged 5.2% as 27 % of its sales in the second quarter came from China. General Motors and Tiffany & Co. declined more than 2.1%. Miner Freeport-McMoRan plunged 12%. Today at 12:00 CET Mortgage Applications will be released in US. At 15:00 CET July job openings and labor turnover summary report will be released. The tentative outlook is positive. At 15:30 US crude oil inventory will be published by Energy Information Administration. And at 19:00 CET July monthly budget statement will be released.

European stocks tumbled on Tuesday on concerns the Chinese yuan devaluation will hurt euro-zone exports to world’s second largest economy. The euro strengthened against the dollar as Greece agreed on terms of third bailout with its international creditors. The deal must still be approved by the parliaments of the euro-zone countries. The Stoxx Europe 600 lost 1.6%. Euro-zone exporters including automakers and makers of luxury goods were hit hardest. BMW fell 4.3%, Daimler AG sank 5.2%, and Volkswagen lost 3.7%. Germany’s DAX 30 was down 2.7% as exporter shares fell, and stayed lower after ZEW indicator of German economic expectations fell in August to 25.0 from 29.7 in July. The Athex Composite rose 2.1% after the country moved closer to receiving 86 billion euros as an agreement was reached on third bailout with creditors. Today at 10:00 CET June industrial production will be released in euro-zone. The tentative outlook is positive. At 9:30 CET job market data will be released in UK. The tentative outlook is negative for the Pound. Tomorrow at 7:00 CET final consumer price index for July will be released in Germany. The tentative outlook is neutral.

Nikkei fell 1.2% to two-week lows today as yen rose on haven demand after Chinese yuan fell for the second day. Exporters fell with steelmakers leading decliners. Tomorrow at 00:50 CET June Machine orders will be published in Japan. The tentative outlook is negative. At the same time financial data on foreign and domestic purchases of bonds and stocks will be released.

Chinese yuan fell for the second day as the central bank set yuan's midpoint rate lower than Tuesday's closing market rate. The official data released today showed factory output growth slowed further to 6% in July from a year earlier, and fixed asset investment and retail sales were also weaker than expected.

Commodity futures are falling today following yuan’s declines.

Oil futures are extending losses today after falling to six-year lows on Tuesday on concerns yuan’s depreciation will lower China’s oil import demand at the time when OPEC reported the organization’s output rose to its highest level in more than three years. Global supply glut persists as major producers pump more crude oil in an effort to retain revenues as prices fall.

Nickel led decliners among industrial metals today as it fell 3.1%, with aluminum, lead, zinc and tin declining at least 1% and copper slipping 0.5% on London Metal Exchange.