The Chinese currency devaluation has markets terrified of a Panda bear market that will eat all the green shoots of global growth.
Driven by the devaluation of the Chinese renminbi and expectations of a rise in US interest rates; emerging currencies continue to drop with the Indian rupee falling to two-year lows and the Malaysian ringgit at the lowest in 17 years.
European markets opened higher on Monday but another slump in China-dependent mining stocks meant the FTSE 100 quickly gave up initial gains while futures point to a lower open on Wall Street.
Analyst downgrades mean shares of Glencore (LONDON:GLEN) are getting stomped on ahead of what’s likely to be a pretty poor quarterly earnings report this week. Shares of H&M are as much as 2% higher after reporting a rise in sales.
The Chinese currency devaluation caused major fallout across global equity markets last week but has hit Europe harder than the US. The resulting lower inflation and rising dollar from any sustained yuan weakening could be a major deterrent for the Federal Reserve to hike interest rates. So while European equities ended the week sharply lower, US stocks rebound sharply off the lows to finish the week higher.
Federal Reserve minutes released on Wednesday could offers some insight on how troubles in China and a huge slide in oil prices will impact the timing of any move on interest rates. The last Fed meeting took place before the yuan devaluation; a big consideration for rate hike timing- so could be a bit stale.
US retailers including importers from China such as Wal-Mart (NYSE:WMT), Target and Home Depot will dominate the earnings calendar this week. The weaker yuan is of benefit to US companies buying Chinese goods with a stronger dollar but they need a more confident consumer at home who is willing and able to buy the goods. US retail sales picked up in July but were pretty sluggish throughout the second quarter.
Estee Lauder and Urban Outfitters (NASDAQ:URBN) report quarterly earnings on Monday.
Futures suggest the:
S&P 500 will open 1 point lower at 2,090 with the
Dow Jones expected to open 7 points lower at 17,470 and the
Nasdaq 100 5 points higher at 4,535.
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