* Yen touches seven-month high before reversing
* Offshore yuan hits a low before pulling back
* Oil prices near seven-month low on demand fears
(Updates through close of U.S. trading)
By David Randall
NEW YORK, Aug 6 (Reuters) - World stock markets inched
higher on Tuesday, propelled by solid gains on Wall Street,
after China's central bank stepped in to stabilize the yuan,
soothing fears that a protracted trade spat between the United
States and China would spill over into a currency war.
Global markets had suffered a rout on Monday after China let
the yuan fall below the 7 to the dollar level for the first time
in more than a decade, spurring the United States to label
Beijing a currency manipulator. On Tuesday safe-haven assets, including bonds, gold and
currencies like the yen and Swiss franc, dipped as investors
moved tentatively back into the euro, sterling and some
emerging-market currencies. Yet investor sentiment remained
fragile.
"I think the tipping point for a more prolonged negative
trend (for risk assets) is quite close," said Hans Peterson, SEB
Investment Management's head of asset allocation.
On Wall Street, the Dow Jones Industrial Average .DJI rose
311.78 points, or 1.21%, to 26,029.52, the S&P 500 .SPX gained
37.03 points, or 1.30%, to 2,881.77 and the Nasdaq Composite
.IXIC added 107.23 points, or 1.39%, to 7,833.27.
The pan-European STOXX 600 index .STOXX lost 0.47% and
MSCI's broad gauge of stocks across the globe .MIWD00000PUS
gained 0.50%.
U.S. President Donald Trump and Treasury Secretary Steven
Mnuchin said on Monday China was manipulating its currency, and
that Washington would engage the International Monetary Fund to
clamp down on Beijing.
"Officially labeling China a currency manipulator gives the
United States a legitimate reason to take even more steps," said
Norihiro Fujito, senior investment strategist at Mitsubishi UFJ
Morgan Stanley Securities. "The markets are now scrambling to
factor in the possibility of the United States imposing not only
an additional 10% of tariffs on Chinese imports, but the figure
being raised to 25%."
Goldman Sachs said it no longer expects a trade deal to be
struck before the November 2020 U.S. presidential election.
Morgan Stanley said more tit-for-tat tariffs could tip the world
economy into recession by the middle of next year.
Though U.S. Treasury yields edged back up to 1.74% from
October 2016 lows of 1.672%, German yields stayed down at minus
0.54%. Markets are now pricing in a 100% chance the European
Central Bank will cut its already negative interest rates again
next month. ECBWATCH
China's offshore yuan stretched the previous day's slide,
briefly weakening to 7.1382 CNH=D4 , the lowest level since
international trading in the Chinese currency began in 2010. But
it pulled back to 7.0469 after Beijing's firmer-than-expected
fixing on Tuesday.
The Japanese yen touched a seven-month high of 105.520 per
dollar JPY= before dropping back as far as 106.700 in volatile
trade. /FRX
Oil prices slipped near seven-month lows as the trade
tensions between the United States and China intensified worries
about slowing global demand. Brent crude oil futures LCOc1
fell 1.3% to $59.06 per barrel, while U.S. crude dipped 1.7% to
$53.74.
Spot gold XAU= stalled after advancing to a six-year peak
of $1,474.80 an ounce.
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Global assets in 2019 http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Global bonds dashboard (DO NOT USE UNTIL UPDATE FOUND) http://tmsnrt.rs/2fPTds0
Emerging markets in 2019 http://tmsnrt.rs/2ihRugV
MSCI All Country Wolrd Index Market Cap http://tmsnrt.rs/2EmTD6j
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