World stocks rise as China quells panic on yuan

Stocks rose with US equity-index futures, while Asian currencies rebounded from a two-day selloff as China's central bank eased concern about a disorderly devaluation of the yuan. German bunds slipped with the yen and gold as demand for havens paused.

The MSCI All Country World Index added 0.2 per cent by 8:14 am in London. The Stoxx Europe 600 Index climbed 1.5 per cent and US futures advanced. Yields on 10-year bunds rose two basis points (bps), while the yen fell 0.3 per cent. South Korea's won jumped 1.4 per cent. The yuan slipped 0.5 per cent to 6.4181 per dollar as China weakened its reference rate for a third day. Gold slipped 0.4 per cent and US oil climbed a second day.

The People's Bank of China said it supports a strong, stable yuan in the long term after its Tuesday decision to devalue the currency roiled global markets. The move stalled the dollar's advance and boosted the appeal of sovereign bonds amid speculation the deflationary impact may give the Federal Reserve pause as it considers the timing of its first interest-rate increase since 2006.

"It's been an overreaction," said Sean Darby, Jefferies Group Inc.'s chief global equity strategist. "This has been on the agenda for some time. The move is probably a very good adjustment for China in the longer term."

The People's Bank of China (PBOC) reduced the level around which the yuan can trade by 1.1 per cent to 6.401 per dollar Thursday, taking its three-day devaluation to 4.7 per cent. The fixing was slightly weaker than Wednesday's onshore closing price, the second day in a row the rate had been set in such a manner.

The PBOC said Tuesday it wants market makers who submit contributing prices to consider the previous day's close, foreign-exchange demand and supply, as well as changes in major currency rates. Policy makers had kept the yuan stable versus the dollar for about four months even as other emerging-market currencies tumbled.