US stocks operated with heavy losses the opening of this Monday and extended the wave of liquidation initiated last week, weighed down by the technology sector and the depreciation of the yuan to its lowest level in a decade before the escalation of trade tensions between China and the States United.
At the beginning of the session, the Dow Jones industrial average was down 225.78 points, or 0.85%, to place its level at 26,259.23 units, while the S&P 500 index declined 33.98 points, or 1.16%, to 2,898.07 points; and the Nasdaq composite index lost 180.74 points, or 2.26%, to 7,823.33 integers.
The three Wall Street referents deepened their declines minutes after the opening.
Wall Street closed the day on Friday in red, at the end of a week marked by the escalation of tension between Beijing and Washington, the Dow Jones left 0.37% and the Nasdaq, 1.32 percent.
Chinese authorities consented to strong depreciation of the yuan
The yuan sank 1.4% on Monday and drilled the barrier of 7 units per dollar for the first time in more than a decade, after two days of weaker-than-expected price ranges established by the People’s Bank of China (PBOC, for its acronym in English).
The slightly lower ranges were set on Friday and Monday after US President Donald Trump announced that he would impose a 10% tariff on imports of Chinese goods worth $ 300 billion from 1 January. September, which put an abrupt end to a truce of a month in the commercial war.
“We had serious internal discussions, including issues such as the timing of the announcement, how to guide the market and how to take other actions in these aspects,” a source of Chinese foreign exchange policy told Reuters.
“The regulators resisted a bit and then half-agreed to the idea of allowing the yuan to devalue after 7 units per dollar,” he added.
The central bank did not comment on the report, but hours earlier said it was confident and was able to keep the yuan basically stable and at reasonable levels.
In a statement released on the central bank’s website, Governor Yi Gang said late Monday that China would not use its currency as a tool to deal with external turbulence such as the trade war, nor would it engage in competitive devaluation.
A second source from the monetary authority said that the decline of the yuan would help the market to calm down after speculating for more than a year about the time when the Chinese currency would touch 7 units per dollar.
“Depreciation is good to avoid growing political and financial risks, such as commercial tensions with the United States,” he said.
A government adviser in Beijing said that although the central bank had been preparing for depreciation, it was triggered by Trump’s unexpected announcement of new tariffs.
“This is not a tactic of the central bank but is due to the decision of the United States (on tariffs). The responsibility should be on the US side. The market was stable before the Washington tariff announcement,” he said.