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US stocks set to rise as Chinese central bank backs off

Last updated: 09:23 13 Aug 2015 EDT, First published: 07:23 13 Aug 2015 EDT

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Betworking equipment firm Cisco topped expectations with its results

US markets are set to open higher as the Chinese central bank stated there was no case for further depreciation of the yuan.

Markets were stunned on Wednesday after the People’s Bank of China allowed its currency to be devalued for a second day; the assumption had been that Tuesday’s devaluation was a one-off event, and so yesterday’s second bout of currency devaluation came as a nasty surprise and sparked fears of a currency war, and potentially put a US Fed interest rate rise this year out of the question.

“Further devaluation is still possible down the line but markets are feeling relief that it’s not happening all at once,” suggested Jasper Lawler, a market analyst at spread betting firm CMC Markets.

With investors able to put Chinese matters on the back-burner for a while, they will turn their attention to US economic data and earnings reports from heavyweights such as networking equipment firm Cisco and department store Kohl’s.

US retail sales are tipped to show a return to growth in July, with economists predicting a rise of 0.5%, or 0.4% excluding autos, following on from July’s 0.1% decline.

“Retail sales in July are expected to have risen by 0.5% which when taken in isolation isn’t a bad reading but when you consider it’s only the third positive sales reading this year, it doesn’t exactly suggest the economy is booming,” observes Craig Erlam, at foreign exchange dealer OANDA.

“Another weak reading today could well be the final nail in the coffin for September [a September rate rise], although there are plenty out there that already think that ship has sailed. I remain confident that a rate hike will come this year although given the current situation with the yuan, December is suddenly looking the more likely,” Erlam speculated.

Cisco’s (NASDAQ:CSCO) shares are expected to open firmer after numbers released last night topped analyst’s estimates. Kohl’s (NYSE:KSS), meanwhile, is lower in pre-market trade after it came up short on both the sales and profits fronts.

Having scraped together a two point gain yesterday to close at 2,086, spread betting quotes indicate the S&P 500 will open around nine points higher today.

The Dow Jones industrial average is seen opening at around 17,469, up 67 points, after it closed barely changed yesterday.

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