China staunches the bloodletting in its stock markets by ditching its 'circuit breaker' mechanism and fixing the yuan higher for a change, giving markets elsewhere some relief at the end of a turbulent week. David Pollard reports.
It's been anything but a happy new year for global stock markets. But China's major indices did regain some ground after the People's Bank of China raised its yuan fix for the first time in nine days. Beijing also ditched a circuit-breaker mechanism that's been blamed for making this week's sell-off much worse. That news buoyed other Asian stocks, too. To the relief of investors like Parry International's boss, Gavin Parry. (SOUNDBITE) (English) PARRY INTERNATIONAL TRADING LIMITED, MANAGING DIRECTOR, GAVIN PARRY, SAYING: "The fact that they've removed these circuit breakers is going to, again, obviously free up the aspect of people to manage their risk profile, and hopefully effectively flush things out of the system." The pan-European FTSE Eurofirst 300 appeared bound for its steepest weekly drop since late August. But as Friday's session opened, also showed signs of inching back. Even if worse could come, warned Baader Bank's Stefan Scharffetter. (SOUNDBITE) (German) BAADER BANK, HEAD OF SECURITISED DERIVATIVES, STEFAN SCHARFFETTER, SAYING: "A great deal of nervousness certainly remains, as we see that the problems in China are far from solved. The market continues to function only through regulating interventions by the Chinese authorities and we must not lose sight of that." China, though, not the only worry, says CEBR's Vicky Pryce. Recent US data has economists downgrading their outlook there too - less than a month after a Fed rate hike supposed to signal all is well. (SOUNDBITE) (English) CEBR, CHIEF ECONOMIC ADVISER, VICKY PRYCE, SAYING: "The implications of raising rates further over the coming year, particularly with the global economy slowing down, are beginning to worry investors and certainly suggesting perhaps that the increase was premature." Brace for further turbulence ahead.