US open: Dow plunges 200 points as China intervenes in yuan

US stocks veered sharply south on Wednesday, with Wall Street lurching towards further losses after China allowed its currency to plunge for the second consecutive day.

Soon after 1500 BST, the Dow Jones Industrial Average was down 223 points, while the S&P 500 and the Nasdaq fell 18 and 53 points respectively.

Yuan tumbles

Asian stocks fell as China allowed its currency to devalue for a second day in a row.

The Shanghai Composite Index lost 1.58% after China’s central bank's new market-led strategy saw its currency devalue for the second day, adding to concerns about the slowdown in the world’s second largest economy.

The national currency, the yuan, was cut by another 1.6% overnight, after Tuesday's 1.9% devaluation. China's commerce ministry said the lower rate would help struggling exporters.

However, the People's Bank of China later intervened to prop up the plummeting renminbi, ordering banks to reduce buying pressure on the dollar, as it attempts to manage the currency's new flexibility.

“The yuan situation only got more complicated with reports suggesting that the Chinese government, after devaluing its currency, was now propping it up by ordering its state banks to sell the dollar,” said Spreadex’s financial analyst Connor Campbell.

“If true it is an utterly baffling move, one that reflects a worryingly lack of clarity and/or sense in the decision making process at the top of the Chinese period, something that in itself that could have disastrous ramifications down the road.”

The dollar jumped 0.94% against the yuan but suffered sharp losses against the yen and the euro, losing 0.91% and 1.29% against the two currencies, while it pulled back 0.20% against the pound.

Wednesday data

The number of job openings declined from 5.36m to 5.25m in June, while the number of hired rose to 5.18m from 5.06m, the JOLTS job report showed.

Meanwhile, the US Mortgage Bankers Association (MBA) said its seasonally adjusted index of application activity, which covers home purchase demand and refinancing demand, climbed 0.1% in the week ended 7 August.

Elsewhere, European stocks fell sharply, with autos and basic resources pacing the decline as worries about a slowdown in China intensified.

Oil prices stages a solid rebound, with West Texas Intermediate climbing 1.44% to $43.71 a barrel as Brent rose 0.95% to $49.65 a barrel, while gold futures rose 0.79% to $1,116.50.

Tech stocks under pressure from China

While the weaker yuan boosted Chinese exporters, it has serious ramifications for companies exporting to China and put carmakers, luxury goods firms and technology groups under pressure.

Having closed down 5.2% on Tuesday, Apple was one of those affected, falling 2.29%, while read-across also hit tech giants Micron Technology and Qualcomm, down 1.45% and 1.20% respectively.

Among the companies reporting ahead of the open, China-based online marketplace Alibaba plunged 5.55% after the e-commerce giant saw its first quarter revenue fall short of estimates, even though earnings beat analysts’ forecast.

IT group Cisco Systems and media giant News Corp will report after the close.