Global stocks extend slide over trade tensions, currency 
2019-08-06
GLOBAL stocks fell for a sixth day yesterday as an escalation of trade tensions between the United States and China spooked markets and the yuan fell to its lowest levels in over a decade.
China’s A-share markets sank yesterday with most sectors suffering losses, while gold and farming stocks firmed.
The sharp weakening of the Chinese yuan prompted equities to retreat. The benchmark Shanghai Composite Index fell by 1.62 percent, or 46.34 points, to finish at 2,821.50.
The smaller Shenzhen Component Index declined by 1.66 percent at around 8,984.73 points, while the ChiNext Index dropped 1.63 percent to finish at 1,531.37 points.
The combined turnover of the two bourses was 416.1 billion yuan (US$59.06 billion), down from the volume of 454.9 billion yuan during the previous trading day.
Conversely, investors flocked to safe haven assets such as Japanese yen and gold, sending shares of companies such as Shandong Gold Group Co Ltd broadly higher.
Analysts and economists advised investors to maintain a calm, reasonable and balanced opinion about the decline of the yuan, and wait to see further developments on its movements.
“The market may worry about the outflow of foreign capital due to the devaluation of the yuan, and yuan-denominated assets may incur some exchange rate losses, but this will be more of a short-term impact,” Qiu Yu, an analyst at Sinolink Securities, was quoted as saying by Caixin.com.
Qiu warned investors to be alert of the underperformance of listed companies as the semi-annual earnings reports start coming in late August.
European shares fell to two-month lows, with the pan-European STOXX 600 index shedding 2 percent on top of the 2.5 percent it lost on Friday — its worst day so far in 2019 — after US President Donald Trump signaled another round of tariffs on Chinese imports.
MSCI’s All Country World Index, which tracks shares in 47 countries, was down 0.7 percent on the day. That put it down almost 2 percent including Friday’s loss.
Asian shares suffered their steepest daily drop in 10 months, with MSCI’s broadest index of Asia-Pacific shares outside Japan sinking 2.5 percent to depths not seen since late January.
The VIX volatility index, also known as Wall Street’s “fear gauge,” rose to 19.02 percent, its highest since May 13, while Europe’s equivalent V2TX hit its highest since early January.
S&P 500 futures were 1.35 percent lower.
“We reiterate our view to scale back equity positions to strategic allocations after strong gains year to date, amid the ongoing trade-related uncertainties,” Credit Suisse analysts wrote in a note to clients.
In offshore markets, the yuan fell to its weakest since international trading of the Chinese currency began.
Headed for its biggest one-day drop in four years, it was last down 1.4 percent at 7.0744 in offshore markets.
