Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious Outperformance
Find Stocks Now

Emerging markets rocky, dollar dips before Fed minutes

Published 08/19/2015, 07:54 AM
© Reuters. A man walks past display showing market indices in Tokyo

By Marc Jones

LONDON (Reuters) - Fears about China's economy kept emerging markets under heavy pressure on Wednesday, while the dollar eased as traders awaited minutes from last month's Federal Reserve meeting for any hints on U.S. rate hike plans.

On another rollercoaster day in Asia, Chinese shares plunged again before ending higher, Vietnam devalued its currency and Japan's Nikkei index (N225) took its biggest fall in more than a month.

European shares fell and index futures suggested the downbeat tone would carry over to Wall Street .

In Germany, lawmakers overwhelmingly voted in favor of a third Greek bailout, increasing the likelihood Athens would be able to make a loan repayment to the European Central Bank later this week.

The main European equity markets <0#.INDEXE> were down between 0.7 and 1.2 percent and safe-haven government bonds were back in favor [GVD/EUR].

The dollar (DXY) weakened broadly pending the Fed's minutes and U.S. inflation data that could signal whether the central bank is on track to raise interest rates next month.

It would be the first rise in almost a decade, but rocky emerging markets and a renewed slump in commodity prices that will drag on inflation are raising doubts about the timing.

Any mention of the slowdown in China or worries about oil prices trading near six-year lows could be seen as a sign the Fed is prepared to wait longer.

"The thing everybody is watching on a day-to-day basis is the whole EM complex. There are all sorts of wobbles going on in China and the market is all over the place," Gavin Friend at National Australia Bank in London.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

The Shanghai and Shenzhen markets (SSEC) (CSI300) fell more than 4 percent early on, but state-backed buyers moved in later in the day, enabling both to finish up more than 1.2 percent.

It is a pattern that has been repeated several times since Beijing's "national team", a coalition of state-backed financial institutions and regulators, went into action early last month with instructions to halt a crash in share prices.

After last week's devaluation, spot yuan

"We think yesterday's stock market crash (in China) reinforced yuan depreciation sentiment, which will encourage more capital outflows, necessitating more open market operations and ultimately a reserve requirement ratio cut in the current quarter," strategists at ING wrote.

GOOD AS GOLD

Oil was still weak after its brief bounce on Tuesday, weighed down by prospects of U.S. demand weakening in autumn and the slowdown in Asia's leading economies.

U.S. crude futures were down 0.5 percent at $42.39 per barrel, edging back towards a 6-1/2-year low of $41.35 struck on Friday. Brent crude was three cents higher at $48.84 a barrel, but still in reach of 6-1/2-month troughs.

But copper prices , which had slid to a six-year low of $4,983 a tonne, breaking the psychological $5,000 level, recovered to $5,013.

Gold

The euro, helped by the dollar's dip, traded at $1.1037

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

"The market will be most interested in where U.S. inflation comes in, because this is something that will determine not just when the Fed begins to normalize policy but also the pace at which they tighten, going forward," said Barclays (LONDON:BARC) FX strategist Hamish Pepper in London.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.