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T3's Take 3: China Devalues Yuan Again, Markets Cry


Today's financial recap and tomorrow's financial outlook.

Today on T3 Live

Techstrat author Sean Udall bought a position in GoPro (GPRO).

He took a 2.5% stake at $54.60. He also wrote a note about Apple (AAPL) exposure to China and the effects of the yuan drop.

Click here to Get $100 Off the TechStrat Report

China Devalues Yuan Again

China made headlines after the government decided to devalue the yuan against the dollar again today, sending another ugly ripple through global markets. Previously, the devaluation was said to be a "one time move."

The yuan has now fallen 3.5% against the US dollar since Tuesday.

The government claims the shift is a response to market forces.

However officials from other countries are claiming that the change in policy is to lower the cost of Chinese exports, causing scares of a currency war among countries seeking to keep their products competitive in the global financial system.

World Equity Markets

European equities continued to post losses today as investor sentiment was shaken by China. The German DAX tumbled 3.3%, while the French CAC dropped 3.4%.

German automakers such as BMW, Daimler, and Volkswagen were once again hammered for their exposure to China. The shares of luxury goods companies were also weak.

In Asia, the Shanghai Composite Index saw a 1.06% decline, with the biggest decline in the region coming from Hong Kong's Hang Seng index, which fell 2.4%. Japan's Nikkei closed down 1.6%.

The S&P 500 opened down on follow-through from Asian and European weakness. However, towards the end of the day, markets slowly picked up with the S&P and NASDAQ hitting positive territory. The second devaluation of the yuan called into question expectations that the Federal Reserve will raise rates, which may have helped sentiment a bit.

Alibaba Feels the Burn

Alibaba (BABA) shares fell 5.1% after reporting earnings this morning before the open.

The company posted its slowest quarterly revenue growth in more than three years, driving concerns about slowing economic conditions and a potential saturation of the Chinese market. The company blamed lower fees from its flash sales site, transfer of its small loans business to a financial affiliate, and a government order to suspend online lottery sales.

In response, the company has authorized a $4 billion share buyback program over two years. To instill confidence in investors, Vice Chairman Joseph Tsai, stated that he nor company founder Jack Ma will sell their Alibaba shares.

Thursday's Financial Outlook

US economic data for tomorrow will include retail sales, import price index, initial jobless claims, Bloomberg consumer comfort, MBA mortgage foreclosures, mortgage delinquencies, and EIA natural gas data.

Overseas economic news will include German consumer price index, the European Central Bank account of monetary policy meeting, Canadian new housing price index, New Zealand retail sales, and China foreign direct investment.

Advance Auto (AAP), Dilllard's (DDS), and Kohl's (KSS) will report earnings before the open tomorrow.

Applied Materials (AMAT), and Nordstrom (JWN) will release their earnings after the close.
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