China markets swing wildly on uncertainty about growth and trade

Major Chinese banks ditching US dollar to prop up domestic currency

Major Chinese banks ditching US dollar to prop up domestic currency

Asian markets struggled on Tuesday, with Hong Kong briefly tumbling more than three percent, as investors fret over looming China-US trade tariffs that bring a potential trade war a step closer.

It is highly unlikely that China is using yuan depreciation as a tool in trade negotiations with the U.S., said Tai Hui, chief market strategist of J.P. Morgan Asset Management (Asia Pacific).

Among equity markets, Hong Kong dived as much as 3.3 percent to nine-month lows, hit also by USA curbs on China Mobile.

The dollar retreated 0.4 percent against a basket of currencies and the easing tensions in Germany helped the euro to gain 0.2 percent against the greenback.

The yuan advanced as much as 0.7% against the dollar shortly after trading began in mainland China on Wednesday.

China's yuan rose sharply against the dollar on Wednesday and stocks flip-flopped a day after the People's Bank of China governor assured markets the central bank would keep the currency stable.

Some reports cited traders as saying that big Chinese state-owned banks, which sometimes act on behalf of the central bank, were buying the yuan.

Both the yuan and Chinese equity markets have been on edge ahead of July 6, when USA tariffs on $34 billion worth of Chinese goods take effect.

On Wall Street, the Dow Jones Industrial Average rose 181.92 points, or 0.75 percent, to 24,356.74, the S&P 500 gained 23.39 points, or 0.86 percent, to 2,736.61 and the Nasdaq Composite added 83.75 points, or 1.12 percent, to 7,586.43.

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Hao Hong, chief strategist at Hong Kong broker BOCOM International, said it's too early to call the bottom.

"It's not clear yet if the trade row will derail the global economy as a whole but it's already clear that it will harm Chinese companies at least", said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank. President Donald Trump had also threatened on Monday to "do something" if the United States was not better treated by the World Trade Organisation.

The mood was more cheerful in Europe where a pan-European equity index rose half a per cent, the euro firmed marginally and bond yields rose after German Chancellor Angela Merkel struck the deal with her Bavarian conservative coalition partners.

RBA Governor Philip Lowe said "one uncertainty regarding the global outlook stems from the direction of worldwide trade policy in the United States", cautioning that the recent U.S.

Shanghai shed 0.2 percent and Singapore lost 0.5 percent, while Tokyo ended the morning marginally lower after fluctuating through the morning.

The Canadian dollar edged up to C$1.3113, its highest level in 2-1/2 weeks.

The Aussie was steady at $0.7338 after dropping to $0.7311 overnight, its lowest since January 2017.

Oil prices bounced back in early Asian trade on Tuesday, with Brent crude rising 0.41 percent to $77.30 per barrel and West Texas Intermediate (WTI) crude was up 0.32 percent to $73.94 a barrel.

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