While some outlets reported that the market’s strong rally today occurred on essentially no news, which could imply that it rallied on a lack-of-news, Bloomberg’s Eric Weiner shares (below) my view that — other than a raft of short-covering (which was likely huge given the levels breached) — it (the catalyst, that is) was all about last night’s yuan fixing, which China set at a level strong enough to allay growing concerns that a currency war was brewing.
“China to the rescue! U.S. stocks surged higher, wiping out their loss for the week, as strength in tech shares pushed the S&P 500 up 1.9% once China’s stronger-than-expected yuan fixing reduced fears of a currency war. George Lei explained how Chinese policymakers are sending a clear message that they want a stable currency, and options and forwards traders are getting it.”
Thing is, and you can take this one to the bank, China not devaluing their currency has — at this point — nothing to do with appeasing the U.S., and everything to do with calming foreign investors; who would absolutely bolt if they thought China was about to devalue in a meaningful way.