China Market falls on trade issues, yuan weakens to 11-year low

The Mainland China equity market stumbled to five-month low on Monday, 5 August 2019, as investor sentiment was at low ebb on heightened concerns over the future course of the globe economy amid escalating trade tensions between the United States and China. The grim mood followed declines on Wall Street on Friday and weaker than expected China's services sector. Further, selloff triggered on fears of a further escalation in the US-China trade war after the yuan broke the psychologically significant 7 level against the US dollar on both the onshore and the offshore markets on Monday, its lowest level in more than a decade. At closing bell, the benchmark Shanghai Composite Index tumbled 1.62%, or 46.34 points, to 2,821.50. The Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 1.47%, or 22.60 points, to 1,517.27. The blue-chip CSI300 index stumbled 1.91%, or 71.75 points, to 3,675.69.

U.S. President Donald Trump abruptly decided on Thursday to slap a 10% tariff $300 billion on Chinese imports effective from 01 September 2019, stunning markets and ending a month-long trade truce. China vowed to fight back on Friday.

ECONOMIC NEWS: China Caixin Private Sector Output Inches Higher In July --China Caixin composite output index rose to 50.9 in July from 50.6 in June, survey data from IHS Markit showed Monday. A score above 50 indicates expansion in the sector. The indicator logged a slight growth reflecting the stabilization in manufacturing output following a drop in June. At the same time, services companies reported a moderate growth. The services Purchasing Managers' Index fell to 51.6 from 52.0 in June. This was the lowest score in five months.

CURRENCY NEWS: China yuan depreciated to 11-year lows against greenback on Monday, inline with softer midpoint fixing by central bank and amid mounting fears over a sharp escalation in the U.S.-China trade war. The yuan unexpectedly broke through the closely watched 7per dollar mark for the first time since the global financial crisis, a level some market players have regarded as major support. It fell to as low as 7.1137 per dollar in offshore trade and 7.0424 to the dollar in onshore. The yuan last stood down 1.5% at 7.0839 offshore, and 1.3% at 7.0319 onshore. It was the first time the yuan traded above 7per dollar since May 2008. The sharp fall came after Beijing vowed on Friday to fight back against Trump's abrupt decision to slap 10% tariffs on the remaining $300 billion in Chinese imports, a move that ended a month-long trade truce.

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