Regional markets kicked higher this morning after China's weekend announcement that it will loosen the yuan's peg to the U.S. dollar.
At lunchtime the ASX 200 was up 47 points or 1% at 4599 as resource stocks benefitted from the Chinese move and Telstra jumped on weekend news that it will take part in the roll-out of the National Broadband Network. The rises were fronted by telecoms +3.8%, metals & mining +1.8% and materials +1.7%.
Asian markets rallied despite China holding the yuan steady this morning, cooling some of the excitement over its weekend commitment. Japan's Nikkei added 1.77% during the morning session, Shanghai rose 0.95% and Hong Kong's Hang Seng 2.5. Dow futures were recently at a bullish +90.
China held the exchange rate steady this morning, despite the central bank's weekend pledge to make the currency more flexible.
"It's a clear signal that the central bank wants to cool down sentiment a little bit," Hontyuan Securities analyst He Yiefeng told Reuters. "The market should not be too optimistic or pessimistic about the future. Appreciation is still around the corner, but it will be modest."
The Australian dollar leaped by a cent in early trade, while the US dollar index fell 0.43% and most commodities rose.
"Falls in the US dollar are typically positive for commodity prices and Chinese purchasing power should improve, auguring well for the Aussie overall, while mining stocks historically have outperformed in rising yuan periods," Scott Haslem, chief economist at UBS in Sydney told Reuters (see link above).
Crude oil futures rallied 92 cents or 1.2% this morning to $78.10 a barrel. The spot gold price was recently 20 cents weaker at $1,256.30 an ounce.
A healthy start to the trading week, with China providing equities with a fresh reason to advance this month's burgeoning trend reversal. I rode the spike in FMG from the open. Looked at RDS in the lows 9s, thought about it and moved on to something else. Doh... Also added EMS - looked overdone intraday, recovering now.
