The markets are struggling to get off the mat after the knockout blow of the devaluation of the yuan. Asian stocks are all down. Tokyo falls -1,6% on a par with Sydney. Hong Kong -1,5% does worse, Chinese lists are also weak: Shanghai - 1%, Shenzhen -0,8%.
Asian currencies quickly fell in line with the new value of the yuan. Both the ruble (-1,9%) and the Brazilian real (-1,8%) fell further against the dollar. The baffle increased this morning when the Chinese Central Bank lowered the value of the yuan by another 1,6% to 6,3306 against the dollar.
Another devaluation? Not really, explains Patrick McGee, an analyst in Hong Kong: “The real news on Tuesday – he explains – was not the 1,9% devaluation of the currency, but the introduction of a new mechanism for fixing prices. From now on, the People's Bank of China will take into account the market trend”.
In other words, given that the offshore yuan fell much more than the official rate yesterday (-2,8% against 1,9%) this morning the price was revised downwards. "The new mechanism - was the comment of the Monetary Fund - is a step forward, as long as it is applied correctly". Even Washington pundits suspect the move is primarily an attempt to address China's economic woes with competitive devaluation.
The fear of a sharp slowdown in the second largest economy on the planet has further cooled oil prices, the WTI future is down by 4,1% to 43,2 dollars a barrel, the lowest in the last six and a half years. Intan OPEC production remains at its highest since 2012. A slight decrease in Saudi Arabia (from 10,6 to 10,4 million barrels per day) was matched by an increase in the rest of the cartel.
APPLE IN FREE FALL, LIKE THE GOOGLE REVOLUTION
The losses of US stocks were heavy: Dow Jones -1,24%, S&P 500 -1%, Nasdaq -1,3%. It was she who paid the highest price Apple -5,2%. The devaluation of the Chinese currency will affect the group's accounts already under pressure from growing competition from Xiaomi. The perplexities of Ubs on the sales trend of iWatch also play against the Apple despite the fact that the CFO of Apple, Luca Maestri, repeats that "we are doing better than expected".
However, the problems with the yuan have not dampened the enthusiasm for the Birth of Alphabet, the new holding company at the top of the galaxy Google. The stock gained 4,27% to then tear off +8,22% after the Stock Exchange at a price of 669 dollars.
The top of Alphabet will be the same as the current Google which will be entrusted to the guidance of Sundar Pichal who has been managing the development of Google's main products for years. Several separate companies will be created under the Alphabet umbrella, each with its own manager for each individual business area already operational or to be developed. ??
In some cases these are real bets in the transport, health, balloons sectors; or of real dreams such as that of bringing the Internet to all of Africa or the activities of Calico, created to develop longevity. The market likes transparency: from today it is possible to understand how much the most innovative projects cost and above all how much they yield: out of 52 analysts surveyed by Bloomberg, 43 recommend buying the stock. Average target price at $750. Lastly, the sale of GE's healthcare unit should be noted, sold for 8,5 billion dollars to Capital One.
EUROPE IS ALSO DROPPING. TODAY BOTS TOWARDS ZERO RETURN
Despite the impact of the news from Beijing on the luxury sector, Piazza Affari limited its losses to 1,1%. The reductions in Paris (-1,8%) and Frankfurt (-2,5%) are much larger. The China cyclone weighed much more on the European lists than the news arriving from Athens. The agreement between creditors and the Tsipras government, which has pledged to carry out a long series of reforms, 35 in all, against aid for 86 billion, further distances the shadow of Grexit. A meeting of euro zone finance ministers will be held on Friday to approve the deal.
The Btp Bund spread stood at 115 points with the yield on the Italian ten-year bond at 1,78%. For today's auction of 12-month Treasuries, rates are expected to fall just above zero: the 6 billion offered (against 7,7 billion maturing) could be assigned at 0,02% against 0,124% in July.
LESS WEALTHY CHINESE TOURISTS, LUXURY PADS THE BILL
Under fire, in Milan as in Paris, the luxury companies, the most exposed to the demand of Chinese consumers, both at home and on trips to Europe. The cyclone, judging by Prada's prices this morning in Hong Kong (-0,28%) could be behind us. But the damage was still huge. Ferragamo it was today's worst blue chip with a drop of 5,5% to 28,53 euros. The maison generates around 18% of revenues in China, 36% in Asia. The entire luxury sector suffered: Moncler lost 3,3%, Tod's 3,2%, Luxottica 2,7%.
GERMAN CAR SKIDS. REGULATES FCA
Fiat Chrysler holds (-1,7%), the least exposed on the Chinese market. And Pirelli (-1,5%) which is waiting for the new shareholder ChemChina. But the European Automotive index is down sharply (-4,2%). The devaluation of the yuan promises to have major consequences for car sales in the already slowing Chinese market. the data, released yesterday, on auto sales (1,5 million units) down 7,1% compared to the same period last year, as well as the biggest decline since February 2013. It is the first time in five years that auto sales in China decline for four consecutive months.
Volkswagen leaves 4,1% on the ground. The group generates only 9% of turnover in China, but 22% of Ebit and 45% of operating profit. The stock has lost 30% of its value in the last four months. ?It went worse for BMW -4,26% and Daimler -5,15%.
Peugeot retreats by 3,65%. Brembo also fell -3,3%, closely linked to the German car. Among the industrialists, the slowdown of Finmeccanica -2% should be noted in Piazza Affari.
SAIPEM ACCELERATES THEN BRAKES. WEAK BANKS
In the rest of the list, the decline in crude oil slowed Eni's recovery by 1,7%. Saipem also slowed down +0,5% after a brilliant morning driven by the judgment of Bofa Merril Lynch which considers it the main potential beneficiary of the halt to sanctions in Iran. Saras' sprint continues +4,86%: ?Enel -0,9%, Telecom Italia -0,1%. ?Among the banks, Intesa Sanpaolo Imi -0,6%, Unicredit -0,9%.
