Daily Agenda: Markets Catch Breath After PBOC Reassures

Greek Prime Minister Tsipras may face a snap election; Glencore to write down oil assets in Africa; Nestlé struggles in face of noodle recall.

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Xaume Olleros

Panic appeared to subside among investors in emerging markets and commodities today. The MSCI emerging-markets index bounced back from declines yesterday that dragged it to the lowest levels since 2011. Futures for both West Texas Intermediate and Brent grade crude oil rose in early morning trading. Among the Asian currencies hit hard by the PBOC actions, the Korean won posted the biggest rebound after the Bank of Korea announced that it would keep rates unchanged. As the dust settles in emerging markets, July U.S. retail sales data will likely bring the timing of the Federal Reserve’s rate hike back into the market sentiment spotlight.

PBOC lowers yuan band again. In the central bank’s third consecutive daily reduction, the People’s Bank of China lowered the yuan to 6.401 today. In an attempt to handle market concerns, the PBOC again insisted that there is no devaluation program in motion but rather that spot levels will “converge to a reasonably stable zone” as soon as markets adapt to the new fixing scheme.

Greek prime minister faces possible snap elections. Dissention among Greek Prime Minister Alexis Tsipras’s own Syriza coalition in advance of the parliamentary vote to accept the latest bailout terms raises the possibility of snap elections, potentially as early as September. Elections would be automatically triggered if the coalition suffered enough desertions to fall below majority. Tsipras has been able to secure sufficient opposition support to secure an approval for the $94 billion payment package. Separately, second-quarter GDP data, released today by the Hellenic Statistical Authority, surprised economists with a 0.8 percent gain for the period.

Glencore takes a hit in African operations. In advance of official first-half earnings due early next week, Anglo-Swiss–headquartered commodity giant Glencore today released a production report for the first two quarters that indicates that it may write down the value of oil assets in Chad by as much as $790 million. The company, which has seen its market capitalization fall to one third of its 2011 IPO level, acquired the Chad operation for $1.35 billion in April 2014.

U.S. retail sales post gains in July. Further boosting the prospect of an interest rate hike by the Federal Reserve in September, the Commerce Department’s Census Bureau reported that July U.S. retail and food services sales rose in line with forecasts. Headline retail trade sales grew 0.6 percent from the previous month and 1.6 percent over July 2014.

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Nestlé struggles with noodle recall. Swiss-based food company Nestlé reported first-half 2015 results today, with sales and net earnings both falling short of analysts’ expectations. Despite setbacks, the company surprised investors with an organic sales growth of 4.5 percent and kept guidance for the full year unchanged, expressing optimism over the resilience of their global packaged food brands. India remains a problem market for the food company, with its division there recording a 20 percent decline in sales for the second quarter after a recall of its popular Maggi noodles over safety concerns.

Inflation remains subdued in Europe. July consumer inflation index levels for Germany released today indicate that the cost of goods increased by an annual rate of 0.1 percent last month. Consumer price index levels for France and Spain increased by 0.2 percent and 0.1 percent respectively in July. Stubbornly low inflation levels across the common currency region presents a major challenge for policymakers at the European Central Bank.

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