Yuan Falls on Rate Cut; US Stock Futures Gain: Markets Wrap

The yuan slid to the weakest level since November and China’s sovereign bonds rallied after the central bank unexpectedly cut a key interest rate to boost its ailing economy.

(Bloomberg) — The yuan slid to the weakest level since November and China’s sovereign bonds rallied after the central bank unexpectedly cut a key interest rate to boost its ailing economy.

The Chinese currency slipped as much as 0.5% after policymakers lowered the rate on one-year loans — known as the medium-term lending facility — by 15 basis points to 2.5%. Only one of 15 economists surveyed by Bloomberg had predicted the move, which came shortly before the release of disappointing data for July showing growth in consumer spending, industrial output and investment sliding across the board and unemployment picking up.

China’s benchmark share index slipped for a third day, as authorities are considering cutting the stamp duty on stock trades for the first time since 2008, people familiar with the matter said. Equity gauges for Japan and Australia both gained. 

Futures contracts for both European and US equities rose after tech stocks in the US had their best day in two weeks on Monday amid the prospect of a soft landing for the economy. The Nasdaq 100 rose 1.2% with gains led by AI-favorite Nvidia Corp. and other technology giants. Still, smaller stocks were under pressure, with the Russell 2000 touching the lowest in a month.

Treasuries were little changed in Asia after 10-year yields had climbed to the highest since November in US trading.


China’s MLF rate cut “is a positive but I suspect the support to the market from this will be subdued and short-lived,” said Redmond Wong, a market strategist at Saxo Capital Markets HK Ltd. “Investors now are worried about credit events, not just from the ailing property sector, and once again also on the shadow banking system and rightly expect that the authorities will not bail them out.”

Tension has been building in China’s financial markets as red flags pop up throughout the economy, but particularly in the troubled property sector. Sentiment has been soured by debt concerns at Country Garden Holdings Co., once the nation’s largest developer by sales, missed payments by one of the nation’s largest private wealth managers, and heavy losses at China-focused hedge funds.

Fed’s Minutes

The focus later this week will be on minutes of the Fed’s July policy meeting as traders seek clues on the central bank’s next move. Investors who’d bet on a pivot to easier policy this year are also having to adjust their bets as officials signal they will keep interest rates higher for longer. 

“The fact that the FOMC has effectively communicated its commitment to restrictive policy and successfully pushed cut pricing into 2024 leaves relatively less incentive to press terminal forecasts higher from here,” BMO Capital Markets strategist Benjamin Jeffery and Ian Lyngen said in a note.

In emerging markets, Argentina’s already-distressed debt slumped Monday after a populist who vowed to burn down the central bank won surprisingly strong support in a primary vote. Its under siege government submitted to a 18% currency devaluation. 

Elsewhere, oil rose and gold held near its lowest close since March as traders pared expectations for Fed rate cuts next year and beyond.

Corporate Highlights:

  • Hawaiian Electric Industries Inc. plunged by a record 34% on concern that its power lines may be linked to the deadly Maui wildfires
  • US Steel Corp. surged 37% after the company got a rival $7.8 billion takeover offer from Esmark Inc. following peer Cleveland-Cliffs Inc.’s unsolicited bid
  • Tesla Inc. slipped 1.2%, triggering a selloff for other producers of electric vehicles, after it rolled out a new round of price cuts in China

Key events this week:

  • Japan industrial production, Tuesday
  • UK jobless claims, unemployment, Tuesday
  • US retail sales, empire manufacturing, business inventories, cross-border investment, Tuesday
  • Reserve Bank of Australia policy minutes, Tuesday
  • Federal Reserve Bank of Minneapolis President Neel Kashkari speaks, Tuesday
  • China property prices, Wednesday
  • Eurozone industrial production, GDP, Wednesday
  • UK CPI, Wednesday
  • US FOMC minutes, housing starts, industrial production, Wednesday
  • US initial jobless claims, US Conference Board leading index, Thursday
  • Eurozone CPI, Friday

Some of the main moves in markets:


  • S&P 500 futures rose 0.2% as of 7:09 a.m. London time. The S&P 500 rose 0.6%
  • Nasdaq 100 futures rose 0.3%. The Nasdaq 100 rose 1.2%
  • Japan’s Topix rose 0.4%
  • Australia’s S&P/ASX 200 rose 0.3%
  • Hong Kong’s Hang Seng fell 0.7%
  • The Shanghai Composite fell 0.3%
  • Euro Stoxx 50 futures rose 0.4%


  • The Bloomberg Dollar Spot Index was little changed
  • The euro was little changed at $1.0916
  • The Japanese yen was little changed at 145.53 per dollar
  • The offshore yuan fell 0.2% to 7.2974 per dollar
  • The Australian dollar rose 0.4% to $0.6510
  • The British pound rose 0.2% to $1.2710


  • Bitcoin was little changed at $29,344.77
  • Ether fell 0.1% to $1,841.05


  • The yield on 10-year Treasuries advanced two basis points to 4.21%
  • Japan’s 10-year yield was little changed at 0.620%
  • Australia’s 10-year yield advanced seven basis points to 4.27%


  • West Texas Intermediate crude rose 0.2% to $82.69 a barrel
  • Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

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