Global Stocks Stabilize After China Concerns

By Christopher Whittall and Tommy Stubbington 

        Global stock markets steadied Thursday after the recent weakening of China's currency slowed.
        The pan-European Stoxx Europe 600 closed 1.0% higher after two sessions of heavy losses. Germany's DAX index rose 0.8%, while France's CAC 40 index was up 1.3%.
        In the U.S., the S&P 500 was down 0.1% as European stock markets closed, following a late-session rally Wednesday. The Dow Jones Industrial Average also fell 0.1%.
        Earlier, Asian bourses climbed and local currencies regained some ground.
        China's Shanghai Composite Index closed 1.8% higher, while Japan's Nikkei 225 index gained 1.0%.
        The signs of stability followed a more gradual decline in the Chinese yuan Thursday after two days of falls. Investors were encouraged by comments from officials at the People's Bank of China on Thursday that the yuan will stabilize and eventually resume its rise. The PBOC also intervened late Wednesday to support the yuan, people familiar with the matter told The Wall Street Journal.
        "The PBOC needed to come out and reassure markets that this big move that we saw over the past couple of days isn't something that is going to continue," said Ken Wong, a portfolio manager at Eastspring Investments, which oversees $134 billion in assets.
        "By the PBOC doing this, it at least relieves some of the tension that the market has had," he added.
        Beijing's surprise devaluation of its currency earlier this week rattled global markets, sending stocks, metals and Asian currencies sharply lower.
        The shift in policy caused investors to raise questions about the health of the world's second-largest economy and threatens to dent the competitiveness of countries that compete with China in the global exports market.
        Some investors expected those concerns to be short-lived.
        "Markets over the last couple of days were overreacting to what I would argue was quite a healthy move from the Chinese authorities to move toward a more freely floating exchange-rate regime," said Alan Mudie, head of investment strategy at Societe Generale Private Banking, which oversees EUR117 billion ($131 billion) of assets.
        The bounce back in Europe "is really a correction from exaggerated pessimism from yesterday and the day before," he added.
        Shares in companies sensitive to Chinese demand recovered slightly after falling over the past two days. In the luxury goods sector, LVMH Moet Hennessy Louis Vuitton was up 2.9%. Car makers Peugeot SA and Fiat Chrysler Automobiles NV were both up more than 1%.
        "We saw this as an opportunity to purchase equities, particularly in Europe where the selloff was too big," said Francois Savary, who oversees around $11 billion as chief strategist at Swiss bank Reyl.
        The Chinese yuan has lost more than 3% against the U.S. dollar since the central bank said Tuesday it would allow markets greater input in setting the value of the currency.
        "It marks quite a change from the way the currency operated in the past. The market is now coming to terms with how this new regime works," said Hamish Pepper, a currency strategist at Barclays.
        Elsewhere in currency markets, the euro fell 0.1% against the dollar to $1.1145, after rising rapidly Wednesday.
        The Turkish lira weakened more than 1% to 2.8300 against the dollar, a record low, after the latest round of coalition talks between the ruling Justice and Development Party and the main opposition party ended without an apparent deal.
        In commodities, Brent crude oil was down 1.6% at $49.38 a barrel. Gold was down 0.8% at $1,115.10 a troy ounce.
        Write to Christopher Whittall at christopher.whittall@wsj.com and Tommy Stubbington at tommy.stubbington@wsj.com
        (END) Dow Jones Newswires

        August 13, 2015 12:14 ET (16:14 GMT)