Global shares climb as firmer Chinese yuan eases deflation fears
World stocks rose sharply on Monday as China’s central bank fixed the yuan at a much stronger rate and oil cemented recent gains, easing fears of global deflation.
The rally belied a string of poor economic data from Beijing and Tokyo as demand for safe-haven assets waned, yet investors remained on edge due to lingering concerns about growth and the health of the financial sector.
European stocks rose 3 percent .FTEU3, having shed nearly 10 percent over the last fortnight, mirroring a bounce in Asia. Futures pointed to notional gains of 1.6 percent on Wall Street ESc1 but U.S. markets will be closed for a holiday.
Meanwhile, assets that tend to perform well in times of stress lagged. The Japanese yen lost ground against the U.S. dollar, top-rated German bond yields edged away from nine-month lows and gold slipped 2 percent after its strongest week in four years.
“We had a very strong statement from the Chinese authorities signaling they are committed to a stable currency and that’s helped sentiment … safe-haven flows have unwound somewhat,” said RIA Capital Markets strategist Nick Stamenkovic.
In China, spot yuan jumped more than 1 percent to 6.4934 per dollar – its firmest this year – after the People’s Bank of China set its daily midpoint 0.3 percent stronger and the head of the bank was quoted as saying speculators should not be allowed to dominate market sentiment. [CNY/]
A stronger yuan reduces the risk that China will export deflation to the world, while worries about consumer price growth have also been helped by bounce back in the oil price.
Brent LCOc1 and U.S. crude futures CLc1 edged up on Monday adding to Friday’s 10 percent surge on speculation that the Organization of the Petroleum Exporting Countries (OPEC) might finally agree to cut output to reduce a world glut.
Euro zone long-term inflation expectations also rebounded from record lows on Monday even as Germany’s Bundesbank cut its forecast for consumer price growth in the bloc’s biggest economy. Read more