Stocks and oil calm as China markets steady

U.S. Treasury 10-year notes fell for the first time in seven days, sending yields up four basis points to 2.19 per cent. China may be selling Treasuries to raise money as part of its efforts to stabilize markets, said Yoshiyuki Suzuki, head of fixed income in Tokyo at Fukoku Mutual Life Insurance, which has $55.9 billion in assets.

In New York, the Dow Jones plummeted 392.41 points to 16,514.10, the S&P 500 lost 47.17 points to 1,943.09, while the Nasdaq declined 146.33 points to 4,689.43.

The Standard & Poor’s 500 index fell 21 points, or 1.1 percent, to 1,922.

The major indexes closed out the week with losses of almost 6 percent or more, their worst since 2011. It was also the bleakest start to a year for the Nasdaq since 2000. The S&P is on pace for a weekly fall of 4.9% as of Thursday’s close, while the Dow is down 5.2%. USA crude picked up 22 cents to $33.49 a barrel in NY and Brent crude, a benchmark for global oils, lost 22 cents to $33.53 a barrel in London.

Chinese stocks have fallen sharply in recent sessions, leading to two trading halts this week.

A flight from risky assets in the first week of the new year has wiped $2.5 trillion from global equities, made worse by China’s central bank cutting its yuan reference rate for an eighth straight day.

The turmoil came against a backdrop of improvement in the USA economy. “Given what’s going on in China and the rest of the world, the USA economy could grow a little more slowly”.

The People’s Bank of China cut both reserve requirements and interest rates, and pumped extra cash into the markets.

“So much for the new year bringing some relief to the markets” said credit strategists at the French bank Société Générale. But investors who fear that the currency has further to fall are likely to sell investments that are denominated in yuan, thereby putting further downward pressure on China’s currency and stocks. USA payroll growth surged in December, capping the second-best year for American workers since 1999. The dollar’s rebound from Thursday’s drop picked up after data showed USA employers added 292k workers in December, above forecasted figures at 200k.

Indexes wavered between small gains and losses for most of the day, but took a decisive turn lower in the last hour of trading. Benchmarks in China, Brazil, South Korea, Thailand and Hungary gained at least 0.6 per cent. Russian markets remained closed for holidays.

“Investors have been continually able to buy stocks cheaper the next day”, said Justin Wiggs, managing director in equity trading at Stifel Nicolaus.

China stocks rose across the board on Friday, with the resources sector surging more than 6 percent and energy shares jumping over 5 percent. February live cattle was off 3 cents to $1.3352 a pound; March feeder cattle lost 4.50 cents to $1.6382 a pound; while February lean hogs fell 1.27 cents at $.5955 a pound.

Apple (AAPL.O), which generates a lot of its business in China and is still the most valuable USA company, fell 4.2 percent to $96.45, its lowest since the August market swoon.

China’s stock market extended a volatile week of trading, swinging between gains and losses early Friday. Instead, he said, “volatility is endogenous, and is a reflection of heightened earnings risks during [the] intense reform and restructuring” that China’s economy and markets are undergoing.

The Bloomberg Dollar index rose, after earlier touching the highest in more than a decade. The precious metal soared 4% to $1,103 an ounce.

China’s currency controls link the yuan to the US dollar, which has risen strongly over the past year and resulted in the yuan becoming 10-15 percent overvalued.

Sources for an earlier story on cross-border currency dealing said some banks may have been targetted because of the large scale of their cross-border forex businesses.