Aug 6, 2019

Dow | U.S. Before The Bell: Dow futures rebound more than 200 points after China stabilizes its currency

Fred Imbert, Silvia Amaro

U.S. stock index futures are positive early Tuesday morning after China’s central bank indicated it wanted its currency to trade higher against the dollar. The bounce came after Wall Street saw its worst trading day of 2019 in the previous session on trade war tensions.
Around 6 a.m. ET, Dow futures recovered to indicate a positive open of about 85 points, after tanking in after-hours trading Monday evening. Futures on the S&P and Nasdaq were also higher Tuesday morning.
Overnight, China’s central bank set the yuan’s official reference point at stronger than the key 7 yuan-to-the-dollar point on Tuesday. The move calmed currency markets, initially rocked by fears the U.S.-China trade war was devolving into a currency war.
U.S. equity markets saw their worst trading day of 2019 on Monday. The sell-off had began last week when President Donald Trump announced new tariffs on Chinese goods. However, market reaction became even more negative when Chinese authorities let the yuan break to its lowest level against the dollar in more than 10 years on Monday.
Also on Monday, the Treasury Department designated China a currency manipulator, a move that has not been seen since the Clinton administration. Beforehand, Trump took to Twitter to voice his opinion on the currency move.
“China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!,” he tweeted.
Meanwhile, the People’s Bank of China (PBOC) set the midpoint for the yuan at a level stronger than what markets were expecting on Tuesday. The Chinese central bank sets a daily rate for the currency, allowing it to trade in a band against the greenback within 2% of the midpoint value, also known as the onshore yuan. Its offshore counterpart is used by foreign investors and banks.
China also confirmed earlier reports that it was suspending the purchases of U.S. agricultural products.The U.S.-China trade war has been going on since last year, dimming sentiment and the outlook for corporate profits and economic growth.

Source: CNBC

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