Global News August 11, 2015
-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.
– 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.
– China devalues yuan in shocking move: The People’s Bank of China allowed the yuan to depreciate by nearly 2% against the U.S. dollar on Tuesday, the result of a surprise policy change that roiled international currency markets. The sudden devaluation is the largest in two decades, and comes amid slower economic growth and increased stock market volatility in China. The dramatic devaluation — even if it is a one-time event — is likely to draw intense criticism from some quarters. The U.S. has long accused China of keeping its currency artificially low, instead of allowing it to move freely in foreign exchange markets. A weak currency cheapens the price of a country’s exports, making them more attractive to international buyers by undercutting competitors.
– Oil giant Shell cuts spending by $15 billion: More bad news for oil industry workers and suppliers: Royal Dutch Shell has joined the ranks of energy companies who are slashing their spending. Shell said it was scaling back its planned capital investment by $15 billion over the next three years. «Shell has options to further reduce spending, but we are not over-reacting to current low oil prices,» the company said in a statement. David Madden, a market analyst at IG in London, described the cuts as «enormous.» The move «signals cautious times ahead,» he added.
-Traders made millions on stocks after hacking press releases: A group of U.S. stock traders teamed with Ukrainian-based computer hackers to gain access to corporate press releases to trade on news before it was public. The group allegedly made $30 million in illegal profits on the trades. Nine individuals face charges in two federal indictments, one that was unsealed in New Jersey Tuesday morning and another expected later in Brooklyn. The Securities and Exchange Commission is also expected to announce civil charges. The three press release distributors that were hacked were Marketwired, PR Newswire and Business Wire. They are widely used by the nation’s largest corporations to announce earnings reports, mergers and acquisitions, and other news that moves their stock. Business Wire is owned by Warren Buffett’s Berkshire Hathaway (BRKA). The trades were linked to news releases from a wide range of companies including Boeing (BA), Hewlett Packard (HPQ, Tech30), Ford Motor (F), Bank of Amercia (BAC) and Home Depot (HD).