Europe
China’s central bank devalued its currency for the third day in a row on Thursday but also stated there was no basis for further depreciation, easing concerns of an escalating currency war.
Shares of European exporters hit the hardest in the past two days following China’s currency devaluation were leading the gains in European stock markets on Thursday. Carmakers including Daimler AG (XETRA:DAIGn) NA O.N. (LONDON:0NXX) and Volkswagen (XETRA:VOWG) as well as luxury goods-makers like LVMH Moet Hennessy Louis Vuitton SA (LONDON:0HAU) who are especially dependent on sales to China were top risers.
For now, markets are going with the idea that the PBOC is adjusting the exchange rate to help the transition away from its peg to the dollar to a free-float.
The Greek statistics office won the prize for biggest market surprise of the day after reporting the Greek economy rose by 0.8% in the second quarter. Even if correct the Greek GDP data actually reflects turmoil rather than economic confidence. The reason for Greece’s economic growth is most likely because the Greek people, for fear of having their money disappear out of their bank account in a bank bail in, went out and spent it on high ticket assets like cars and household goods.
With the price of crude oil back near multi-year lows, shares of Royal Dutch Shell (LONDON:RDSa) were down over 2% and weighed on the FTSE 100 on Thursday undoing well received earning reports from Coca Cola HBC AG (LONDON:CCH) and TUI Travel.
Shares of Coca-Cola HBC rose over 7.5% as good earnings added to positive sentiment in the company brought on by the proposed merger with Coca-Cola Enterprises and Coca-Cola Iberian partners.
Burberry Group PLC (LONDON:BRBY) and ARM Holdings PLC (LONDON:ARM), two companies that would have seen some of the biggest fallout from a further devaluation of the Chinese currency were top risers in the UK share benchmark on Thursday, but are still well down on the week.
US
US markets opened slightly lower on Thursday as markets felt relief that the situation had calmed in China but falling oil prices hit energy companies including Exxon (NYSE:XOM) and Chevron (NYSE:CVX) and a solid retail sales report for July brought a September rate hike back into view.
FX
The US Dollar was broadly stronger on Thursday after retail sales growth met expectations and the numbers for June were revised higher. Weekly jobless claims remained close to 30 year lows at 174K.
German CPI remained very weak in July at 0.1% according to the latest estimate leaving the euro lower on the day.
The Japanese yen continues to flirt with multi-year lows with USD/JPY still finding the air a little thin above 125.
Commodities
Oil prices plummeted on Thursday with WTI crude down as much as 3% and near six year lows after Switzerland became the first country to lift sanctions on Iran since the nuclear deal. Switzerland should be the first of many, which will help Iran continue to expand its oil output adding to the global supply glut.
Gold and silver are pulling back from the recent break higher as safe-haven flows reverse. The up-move should still be intact if gold can hold $1,110 and silver can stay above $15.10 per oz.
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