China devalues the yuan and stuns global markets, Google shakes up its structure, and a deal is on the horizon for Greece. Here are some of the things that people in markets are talking about this morning.
China's shock currency move
In a surprise policy shift, China devalued the yuan by the most in two decades in a bid to support exporters and allow market forces to play a greater role. The People’s Bank of China -- making what it called a one-time adjustment -- cut its daily reference rate by 1.9 percent, triggering the yuan’s biggest one-day drop since 1994. The yuan’s real effective exchange rate -- a measure that’s adjusted for inflation and trade with other nations -- had climbed 14 percent over the last four quarters, placing it above most major currencies. The move follows economic reports this month showing a plunge in overseas shipments, weaker-than-estimated manufacturing and slowing credit growth.
A devalued yuan jolts global markets
China's move rippled through every asset class -- commodities, emerging-market currencies and big China exporters including BMW, Swatch and Burberry all tumbled. An index tracking Asian currencies versus the dollar sank to the lowest level since 2009. Yields on 10-year U.S. and German government bonds dropped at least three basis points. Copper, nickel, tin and aluminum fell at least 1.5 percent. Chinese companies, which have $529 billion in dollar and euro bonds and loans outstanding, could see their debt costs jump by $10 billion, according to Bloomberg-compiled data. Says one fund manager: "There are obviously fears about an intensifying currency war."
Shake-up at Google
Google will reorganize into a holding company that gives its main Web operations greater independence, while offering investors more visibility into ambitious plans to expand new businesses. YouTube, Android mobile software and other Web-based products will be key components of the new entity, Alphabet Inc. The new structure will give greater clarity into how Google invests in various ventures, including driverless cars, high-speed Internet and health-related technologies. It also makes it easier to make any future acquisitions or potential divestments. Alphabet will be a subsidiary of Google’s for a while, then Alphabet becomes the parent company, and Google becomes just one of its subsidiaries. Google co-founder Larry Page will run the overall organization, but in a release issued yesterday, Page promised more details “later this year.” Google shares spiked about 5% in after-hours trading when the news was announced.
All-night talks in Athens yield a deal
After almost two weeks of intensive talks, Greece reached an accord with creditors on the terms of a third bailout. Greece clinched a deal with the institutions representing its creditors on a rescue package that would release as much as 86 billion euros ($94 billion). The pact paves the way for national parliaments to vote on the deal before an Aug. 20 payment falls due to the European Central Bank. Finance Minister Euclid Tsakalotos told reporters after the talks that just “one or two very small details” remain.
And in the U.S.
AT&T Inc is among 42 companies reporting earnings today, while Symantec Corp., Cisco Systems and News Corp. are due to report later this week. Investors will also be watching a report on wholesale inventories today, which are expected to grow at a slower pace than in June.
What we've been reading
This is what's caught our eye today.
- Alan Greenspan: “We have a pending bond market bubble.”
- Cybercrime meets insider trading, via a Ukranian hacker ring
- The PawSquad -- where pets can meet vets
- Warren Buffett bets on Chinese tourists
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