They begin, the FX wars
Global stock markets don't like the idea of competitive devaluations. The S&P 500 is down 14 points to 2089 after rising 26 points yesterday.
The market still doesn't quite know how to react to the Chinese devaluation. Iron ore prices were up 3% but analysts at BofA Merrill think it's a chance to sell.
They write:
"While a CNY devaluation may be supportive of economic activity in China in the long run we think the immediate reaction is negative for commodities with China's purchasing power declining. We think this has particularly negative implication for iron ore prices.
"We also think China metals producers could look to divert more production into the export market as local margins get squeezed (cost of imported raw mats just went up)....negative implications for global steel and aluminium producers. We would expect to see more instances of trade protection in steel...US and Europe already have a number of investigations underway."