Europe close: Stocks tumble on PBOC's currency decision as oil plunges
European equities fell as investors reacted to the Chinese central bank’s surprise devaluation of the yuan, which lifted the dollar and hit basic resources.
AEX Index
860.01
08:00 09/09/22
Bayerische Motoren Werke AG St
€105.85
16:45 19/04/24
BEL 20
3,827.75
18:07 22/01/21
Burberry Group
1,132.00p
17:08 19/04/24
CAC 40
8,022.41
16:59 19/04/24
Daimler AG
€70.16
16:30 19/03/24
Delta Lloyd
€5.27
16:30 08/03/19
DJ EURO STOXX 50
4,918.09
00:00 20/04/24
FTSE 100
7,895.85
16:59 19/04/24
FTSE 250
19,391.30
17:09 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
LVMH
€796.60
17:19 19/04/24
Personal Goods
15,722.74
17:10 19/04/24
Xetra DAX
17,737.36
17:00 19/04/24
The benchmark Stoxx Europe 600 index was down 1.55%, Germany’s DAX was 2.68% lower and France’s CAC 40 fell 1.86%.
Greece bucked the trend, however, with the Athex Composite up 2% as it emerged the debt-ridden nation has finally reached an agreement with its creditors on a third bailout.
“Given the current desperate state of Greece’s economy, creditors have caved-in on budget surplus requirements, formerly a big sticking point in negotiations,” said CMC Markets’ analyst Jasper Lawler.
“2015 is forecasted to see a budget deficit of -0.5% while the surpluses expected in 2016 and 2017 are significantly reduced.”
The euro registered gains of 0.44% and 0.58% against the pound and the yen respectively and climbed 0.36% against the dollar, while Brent crude plunged 3.13% to $48.88 a barrel.
PBOC's decision surprises investors
In an attempt to boost its slowing economy, the People’s Bank of China devalued the renminbi by the largest amount on record, slashing its daily fixed rate to the dollar by 1.9% to 6.228.
The PBOC said in a statement that it would aim to keep the exchange rate at 6.2298 yuan per US dollar, down from 6.1162, and would try to allow the currency to depreciate by 2%.
“One thing is clear, however, and that is the weak state of China’s economy, or at the very least concerns that things will get worse unless action is taken,” said IG’s senior market analyst Chris Beauchamp.
“Markets have become rather too accustomed to the idea that Chinese growth will decline gradually below the 7% level, but they may be in for a rude shock if the slowdown is more rapid than expected.”
Data showing that German economic sentiment fell to a nine-month low in August added to the negative tone on Tuesday.
A report from the ZEW Centre for Economic Research showed its economic confidence index fell 4.7 points to 25.0 this month, dragged lower by concerns over the state of the global economy.
The figure marked the fifth consecutive decline and fell short of analysts’ expectations of a 2.3 points increase.
Automakers feel the pinch
In company news, there was further bad news from China for automakers, with data showing car sales in the country fell in July for a second month in a row, as the industry continues to struggle with high inventories.
Daimler and BMW were both firmly lower, losing 5.15% and 4.26% respectively.
Meanwhile, shares in other companies with significant exposure to China also took a hit, with luxury brands Burberry and LVMH both under pressure, falling 2.37% and 5.11% respectively.
Elsewhere, staffing company Adecco fell 4.38% after its second-quarter results missed expectations.
Shares in Delta Lloyd NV tumbled over 20% after the Dutch Insurer said it swung to a loss in the first half.