Published: Tue, August 06, 2019
Worldwide | By Lisa Hogan

Trump says China's currency move is 'a major violation'

Trump says China's currency move is 'a major violation'

The yield on the 10-year Treasury fell to 1.77%.

China has pledged not use the currency as a weapon in the trade war against the United States.

"This is a major violation which will greatly weaken China over time", he wrote on Twitter.

"They have helped but we'd rather have open markets because it creates stability in our financial sectors", said Derek Sawyer, 39, a corn, soybean, wheat and cattle farm from McPherson, Kansas.

The weakness of the yuan, also known as the renminbi, or "people's money", is among US grievances against Beijing.

The Dow Jones Industrial Average posted a loss of 767 points by the close of business as world markets also fell to the news that the Chinese yuan was reduced to its lowest valuation in a decade. Last week, the S&P 500 and the Nasdaq Composite logged their worst week of the year last week.

United States stocks rose in June and July on dovish commentary from the Federal Reserve ahead of an interest rate cut last week.

The pan-European STOXX 600 index fell 2.13 per cent, putting it on pace for its largest two-day decline in over three years. The S&P 500 is 6% below its record.

All of which is to say, this could go on for a long time and cause a lot of damage to the global economy along the way.

China bought 130,000 tonnes of soybeans, 120,000 tonnes of sorghum, 60,000 tonnes of wheat, 40,000 tonnes of pork and products, and 25,000 tonnes of cotton from the United States between July 19 and August 2, the official said.

In an earlier statement, the central bank attributed the yuan move to protectionism and expectations of additional tariffs on Chinese goods.

The escalating dispute between the world's largest economies is rattling investors unnerved about a global economy that was already slowing and falling US corporate profits.

The moves, which came four days after Trump threatened more taxes on Chinese imports, knocked stock markets worldwide into a tailspin. In the worst case, falling prices encourage people and companies to hold off on buying things, which starts a vicious cycle of less and less economic activity.

"As in retaliation for new tariffs, China let the yuan move to a 10-year low versus the USA dollar", said Ryan Detrick, senior market strategist for LPL Financial in Charlotte, North Carolina. Analysts were mixed, though, on whether the move was a result of China weaponizing the yuan or merely a reflection of its own slowing economy and the painful effects of tariffs.

U.S. technology companies and banks were hit hardest, with Apple (-5.2pc) and Bank of America (-4.4pc) posting heavy losses. The report said that 2.27 million tonnes of usa soybeans had been loaded and shipped to China in July, since Trump met Chinese President Xi Jinping in Osaka at the G20 summit at the end of June.

Big tech was hit hard in the pullback.

Monday's plunge in bond yields dragged on banks by making lending less profitable. Apple fell 3.9% and Microsoft fell 2.5%. Gold prices jumped by more than one percent to hit their highest level in more than six years today, while the Japanese yen and core government bonds also increased. Profit for companies in the S&P 500 is now expected to contract by roughly 1%. The S&P 500 is up almost 17%.

The VIX volatility index soared more than 30% to a seven-month high.

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