Sentiment remains exposed to rhetoric on global trade and the wider implications of a slide into a deeper tit-for-tat dispute, with concern that China may be allowing its currency to weaken as a tactic in the stand-off with the US.
The offshore renminbi weakened past Rmb6.7 per dollar for the first time in close to a year — one of its steepest intraday falls on record — before the central bank appeared to intervene to stabilise the market.
In a statement posted on the People’s Bank of China’s website on Tuesday afternoon, governor Yi Gang sought to calm markets, attributing renminbi weakness to the strong dollar and “some pro-cyclical behaviour”.
Hong Kong stocks suffered a steep fall as traders returned from Monday’s market holiday, while wider Asian equities were broadly lower.
The Hang Seng closed down 1.4 per cent in Hong Kong, off steeper intraday lows that took it down around 3 per cent.
Stock benchmarks on China’s mainland followed a similar path. The CSI 300 index of major Shanghai and Shenzhen-listed companies closed on the flatline, having been down as much as 2.6 per cent and after ending Monday’s trade with a 2.9 per cent fall.
London’s FTSE 100 is up 0.8 per cent, while the Paris CAC 40 is 0.9 per cent higher. The Europe-wide Stoxx 600 is also up 0.9 per cent.
Banking stocks are finding more support, with the Stoxx index tracking the sector in Europe up 0.7 per cent and the equivalent benchmark for carmakers climbing 1.2 per cent.
Tokyo’s Topix ended down 0.5 per cent, losing momentum after initial gains.
Forex and fixed income:
There is a broader trend for the dollar to head away from some of its highest levels of the year, with the index tracking it down 0.4 per cent at 94.64.
Sterling is up 0.2 per cent at $1.3170, taking it off some of its weakest levels of the year, after robust economic data from the construction sector.
Turkey’s lira has taken a hit from a sharp jump in inflation, weakening it by 1.3 per cent to TL4.6720 per dollar.
Japan’s yen is 0.1 per cent firmer at ¥110.61 per dollar.
In the US, the yield gap between the two-year and 10-year Treasury fell below 30 basis points for the first time since 2007 as the 10-year fell 3bp to 2.84 per cent and the two-year yield fell 1bp to 2.54 per cent.
Oil prices are climbing after dropping overnight, with international benchmark Brent crude up 0.8 per cent at $77.89 a barrel.
S West Texas Intermediate rose as high as $75.27 — its first break above $75 since 2014 — before going into reverse to trade 0.6 per cent lower at $73.49.