European stocks bounce back as China moves to strengthen currency

Economy, Markets | Tue 6 Aug | Author – Business & Finance

Eurozone government bond yields fell early this week as global trade war concerns increased; fears exacerbated by Washington accusing China of manipulating its currency on Monday.

The latest mud slinging in the year long US-China trade war was sparked as Beijing allowed the yuan to fall below 7.0 to the dollar for the first time in 11 years.

While the People’s Bank of China (PBOC) denies the charges made by the US, the recent warfare has reinforced the expectation of additional stimulus measures and rate cuts from the large central banks.

Germany’s 2-year bond yield reached -0.82pc, its lowest level since May 201, and most 10-year euro zone bond yields fell 2-3 basis points.

“Based on the historic currency manipulation by China, it is now even more obvious to everyone that Americans are not paying for the tariffs – they are being paid for compliments of China, and the US is taking in tens of billions of dollars,” US President Donald Trump tweeted.

“China has always used currency manipulation to steal our businesses and factories, hurt our jobs, depress our workers’ wages and harm our farmers’ prices.”

On Tuesday, the PBOC said that the label of currency manipulation “seriously undermines international rules and will have a major impact on global finance and economy.”

The Chinese central bank’s market response, however, was measured as the yuan’s daily price target did not pass the 7-per-dollar threshold on Tuesday.

European stocks climbed throughout the morning after China took steps to limit the yuan’s decline.

Strong German manufacturing data also helped buoy the European market as factory orders jumped 2.5pc in May of this year.