Asian stocks hit record lows in 17 months, China lets yuan slip

SYDNEY (Reuters) – Asian stocks hit lows at 17 months on Tuesday, as China let its currency go under a psychological bulge despite recent losses in domestic stock markets, a shift that put other emerging currencies.

The Pakistan rupee plunged about 5% in an apparent devaluation of the central bank, market participants said.

The IMF has added to the malaise by cutting global growth forecasts for this year and next, notably by downgrading the outlook for the US, China and Europe.

"The risk sentiment is in a bad mood and stocks are falling everywhere," JPMorgan analysts said in a note.

"While China's economic momentum continues to weaken in the face of growing US pressure, the weakness of the currency is the obvious valve of liberation," they warned. "It is possible to cross the 7.0 level by the end of the year."

The Chinese central bank set its yuan at 6.9019 dollars a dollar on Tuesday, crossing the 6.9000 barrier and encouraging speculators to push the dollar to 6.9120 on the spot market.

The decline should be a positive factor for exporters and allowed Shanghai to reduce its market share by 0.3%. However, this follows a 4.3% drop recorded on Monday, which represents the largest daily decrease since the beginning of 2016.

The broadest MSCI share of Asia-Pacific stocks outside Japan remained stable after finishing Monday at its lowest level since May.

The Nikkei of Japan fell 1.3%, partly because of the rise in the yen.

On Monday, a senior US Treasury official expressed concern over the fall of the yuan, adding that it was unclear whether Treasury Secretary Steven Mnuchin would meet Chinese officials this week.

On Wall Street, the technology-driven Nasdaq had fallen for the third consecutive day on Monday and the growth stocks were squeezed by worries. Rising bond yields could ultimately hinder the economy.

The S & P 500 lost 0.04% and the Nasdaq Composite, 0.67%, while the Dow Jones rose 0.15% as defensive stocks found buyers.

No safety net

The 10-year Treasury yield hit a new seven-year high on Tuesday at 3.252%.

Treasuries have so far been a sort of safety net, as rising yields tend to dampen equities and threaten economic prospects, pushing the Federal Reserve to slow down policy tightening.

Yet, recently, the Fed has appeared so optimistic about the economy and so fierce about the rates that the net has frayed.

"The magnitude and speed of the bearish bond pulse would suggest a collective shift in market thinking about US growth prospects and policy forecasts," said Damien McColough, Head of Strategy. Westpac rate.

"The expected profile of the Fed for 2019 has gone from just below 2 hikes to 2.5 ha taking into account."

This development has strengthened the dollar against a basket of currencies where it amounted to 95,677, against a minimum of 93,814 a few weeks ago.

The dollar was less fortunate on the safe haven of the yen, returning to 113.07 from a high of 114.54 last week.

The euro was undermined by political turmoil in Italy and lounged at $ 1.496, well above the September high of $ 1.1815.

Italy's borrowing costs exploded as the war of words between Rome and the European Union rose above the country's budget plans.

Italy's 10-year government bond yield rose more than 20 basis points to 3.626%, the highest level since February 2014, while the Italian FTSE MIB index fell to its lowest level since then. April 2017.

Brazil's real money hit its all-time high in two months and shares surged after Sunday's strong victory over presidential candidate Jair Bolsonaro, the market's preferred candidate.

In commodities markets, gold has obtained a modest security offer at US $ 1,191.10, after falling 1.4% overnight.

Oil prices rose on Tuesday as new evidence showed Iranian oil exports, OPEC's third largest producer, were dwindling on the eve of the new imposition of US sanctions and a hurricane in the Gulf of Mexico. Mexico. [O/R]

Brent crude added 50 cents to 84.41 dollars a barrel, while US crude oil was up 41 cents to 74.70 dollars.