Dramatic S&P 500 Swing on China News a Sign of a Broader Risk Move?
• China has dropped its Yuan reference rate by more than 1 percent for three consecutive days
• A currency devalue by the world's second largest economy has many crying 'currency war'
• Equities tumbled on day two of the Yuan drop, but a rebound for SPX and company may signal understanding
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Global equities tumbled this past session following the second day of the PBoC's Yuan policy adjustment. The S&P 500 experienced the same pang of panic as its global counterparts; but by the end of the New York session, it had retraced most of its losses. For those keeping track of the 'risk' score card via fear of Chinese volatility or a global currency war, this looks like manic-level indecision. However, this may simply be a rebalancing and shift to neutral for speculative appetite rather than a projection of risk appetite or aversion. The coming session will determine whether sheer volatility will unsettle the seasonal lull or China's efforts will simply be absorbed as a necessary change. Meanwhile, the Dollar is moving as rate speculation stirs and Greece's headlines may shift from bailout progress to painful recession. We cover these themes and market opportunities in today's Trading Video.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.