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Stocks in both Europe and the Americas are bouncing on Wednesday after President Donald Trump made a move that looks likely to deescalate the trade war developing between his adminstration and the rest of the world.
Earlier, Trump announced the details of a plan to crack down on Chinese investment in US technology companies, and the final results were weaker than expected.
The news buoyed investors, who have previously been nervous about the possibly devastating consequences a trade war could have on the global economy.
Major share indexes in both Europe and North America are significantly higher on Wednesday as a result of the announcement, with the USA’s benchmark Dow Jones Industrial Average up by almost 250 points.
While Trump’s climb down has soothed Western markets, things in Asia overnight were not pretty, with the earlier escalation of trade tensions having a significant negative impact on Chinese markets, with stocks in the world’s second largest economy suffering major losses.
China’s benchmark share index, the Shanghai Composite, dropped 1.1% on Wednesday — leaving it nursing losses of 22% from its most recent high, extending the bear market it entered at the beginning of the week. Bear markets are characterised by a fall of 20% or more from a high.
Negative sentiment in Asia overnight also saw Hong Kong’s Hang Seng drop 1.7%, and the Shenzhen Composite fall 1.8%.
For China, there is an ongoing double whammy of bad news. As well as Chinese stocks falling into a bear market, the country is also witnessing a major slide in the price of its currency, the yuan, which overnight fell to its lowest level in more than six months.
The USD/CNH, or the US dollar versus the offshore traded yuan, hit a high of 6.6105 earlier, leaving it at the highest level since December 20 last year.
An increase indicates the US dollar is strengthening against the yuan.
Along with escalating trade tensions between the United States and China, the yuan has been under pressure in recent months from a softening in Chinese economic data as well as divergent monetary policy settings between the PBOC and US Federal Reserve.
