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GLOBAL MARKETS-Stock markets find a floor as Chinese data soothe nerves

Published 08/08/2019, 05:10 PM
Updated 08/08/2019, 05:20 PM
GLOBAL MARKETS-Stock markets find a floor as Chinese data soothe nerves
XAU/USD
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FCHI
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DE40
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GC
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LCO
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ESM24
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CL
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DE10YT=RR
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US10YT=X
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US30YT=X
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FR10YT=RR
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STOXX
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MIWD00000PUS
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* European stocks follow Asian markets higher
* Chinese imports fall but by less than expected
* Govt bond yields rise after blistering rally
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes
LONDON, Aug 8 (Reuters) - Stock markets enjoyed a tentative
recovery on Thursday after better-than-expected Chinese export
data and a steadying of the yuan restored some calm to global
markets.
European markets followed Asia higher in early trade, helped
by data showing Chinese exports rose 3.3% in July from a year
earlier, beating an expected decline of 2%. Chinese imports fell
by less than forecast, despite the Sino-U.S. tariff struggle.
China moved on Monday to allow the yuan to weaken beyond 7
yuan per dollar, after U.S. President Donald Trump said he would
impose more tariffs on Chinese imports. That sent markets into a
tailspin.
Investors fear the trade conflict between the world's two
biggest economies will cause a global recession. Bond markets
have flashed red and a closely watched U.S. recession indicator
reached its highest level since March 2007 On Thursday, the pan-European Euro STOXX 600 .STOXX rose
0.87%. Germany's DAX .GDAXI was up 0.84% and France's CAC 40
.FCHI 1.03%.
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 47 countries, rose 0.25%. It remains down more than 3%
since the start of August.
"There's a little bit of calm back in the market at the
moment," said Peter Kinsella, global head of FX strategy at UBP.
"But the ball is very much in Trump's court."
Wall Street recovered earlier losses on Wednesday and
finished the day higher. E-Mini futures for the S&P 500 ESc1
gained 0.34%, suggesting it would build on that recovery on
Thursday.

RECESSION FEARS
Investors ran for the safety of bonds this week as fears of a
recession grew.
Yields on U.S. 30-year bonds US30YT=RR fell as low as
2.123% overnight, not far from a record low of 2.089% set in
2016. Ten-year yields US10YT=RR dropped further below
three-month rates, an inversion that has reliably predicted
recessions in the past. US/
The latest spasm began when central banks in New Zealand,
India and Thailand surprised markets on Wednesday with
aggressive interest rate cuts "Financial markets are raising risks of recession," said
JPMorgan economist Joseph Lupton. "Equities continue to slide
and volatility has spiked, but the alarm bell is loudest in
rates markets, where the yield curve inverted the most since
just before the start of the financial crisis."
Markets have ramped up their expectations for more easing by
the U.S. Federal Reserve, but the question remains how fast Fed
policymakers will move.
Futures 0#FF: moved to price in a 100% probability of a
Fed cut in September and a near 24% chance of a half-point cut.
Some 75 basis points of easing is implied by January, with rates
ultimately reaching 1%. FEDWATCH European and U.S. government bond yields rose on Thursday,
with German DE10YT=RR and French FR10YT=RR 10-year yields up
from record lows after a rally in recent sessions. The 10-year U.S. Treasury yield rose to 1.7155% US10YT=RR
from as low as 1.595% on Wednesday.
Gold also benefited this week as investors scrambled to find
somewhere safe to park their cash, rising above $1,500 for the
first time since 2013. Spot gold XAU= was last at $1,498 per
ounce, down from as much as $1,510 on Wednesday. Gold is up 16%
since May. GOL/
In foreign exchange markets, the Japanese yen rose again,
gaining 0.2% to 106.04 yen per dollar JPY=EBS . The yen tends
to gain at times of uncertainty, and its rise this week
underlined investor fears.
China's yuan also gained. In the offshore market it rose
0.2% to 7.07 yuan per dollar after touching as high as 7.14 yuan
on Tuesday.
The dollar slipped, losing 0.2% against the euro to $1.1223
EUR=EBS .
Oil prices regained some ground amid talk that Saudi Arabia
was weighing options to halt its decline, offsetting an increase
in stockpiles and fears of slowing demand. O/R Brent crude LCOc1 futures climbed $1.25 to $57.48, though
that followed steep losses on Wednesday, U.S. crude CLc1 rose
$1.46 to $52.53 a barrel.

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