Chinese devaluation hurts markets in Europe

Move on yuan overnight brings down shares in mining, cars and luxury goods

Kingspan was one of the day’s better performers, climbing 1.25 per cent to €23.01

Kingspan was one of the day’s better performers, climbing 1.25 per cent to €23.01

 

Car makers, miners and luxury goods manufacturers led a near across-the-board fall in European shares triggered by China’s decision to devalue its currency.

China’s move prompted investors to sell shares in Europe’s main exporting businesses as the devaluation is likely to make their goods more expensive, making them more difficult to sell in the Asian country. Many of them had been benefitting from a weaker euro.

DUBLIN The Irish market fared better than most

in Europe on a largely quiet day.

Building giant, CRH, which has some operations in China, dipped 0.9 per cent to €27.535, in line with the sector generally. Kingspan, was one of the day’s better performers, climbing 1.25 per cent to €23.01.

Permanent TSB gave up some ground it made recently, sliding 1.16 per cent to €5.10.

Ryanair was virtually unchanged, ending the day 0.08 per cent off at €12.77.

Cider maker C&C dipped 0.96 per cent to €3.503 despite news of a turnaround in its US business, where sales have been declining for 20 months.

LONDON

PrudentialAsia

Chief executive Mike Wells said the UK life business saw a strong performance despite “unprecedented” regulatory change. Shares rose almost 5 per cent or 70.5p to 1577p.

Mining group Glencore led the declines with a 7.3 per cent drop. BHP Billiton fell 60.5p to 1148.5p and Rio Tinto by 81.5p to 2553.5p. Copper fell 3.2 per cent after the move by China, which is the world’s biggest consumer of metals. The mining sector closed down 4.4 per cent, moving back towards a six-year low hit in late July.

Burberry, which sells extensively in China, also fell 4.4 per cent to 1536p.

“A weaker yuan makes imports more expensive and, with China accounting for some 14 per cent of the company’s sales, the implication is clear,” Trustnet Direct analyst Tony Cross said. Britain’s FTSE 100 closed down 1.1 per cent.

Weakness in commodity stocks has contributed to recent declines in the index, which is now more than 6 per cent off April’s record high.

EUROPE

Germany’s ZEW survey also dented the mood, with its economic sentiment reading down from the previous month and below expectations.

Carmakers BMW, Daimler and Volkswagen sank 4 to 5 per cent. Swatch and LVMH both fell around 5 per cent.

“We have reduced our exposure to European export-led sectors such as car makers,” said François Savary, chief strategist at Swiss bank Reyl.

However, the Athens stock market – which has consistently underperformed this year – rose after Greece and its international lenders reached a new bailout agreement.

Athens’ benchmark ATG equity index advanced 2 per cent as the Greek banking index rose 3 per cent, with National Bank of Greece shares up sharply.

Finnish cranemaker Konecranes surged more than 15 per cent after it agreed on a merger with US peer Terex.

NEW YORK

Otherwise US stocks suffered in the wake of the yuan depreciation. Apple fell nearly 3 per cent to $116.23 after Jefferies raised concerns about the demand for the iPhone, primarily in China. The stock was the biggest drag on all three indexes.

Google rose 3.6 per cent to $687.34 after it said it would overhaul its operating structure. – Additional reporting: Bloomberg, Reuters