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London - The financial turmoil triggered by China’s currency devaluation was slow to dissipate in emerging markets, while investors in US stocks and bonds refocused attention on the spectre of higher interest rates.
Treasuries fell and equities advanced amid factory data that added to evidence the US economy is strong enough to withstand an increase in the Federal Reserve’s target interest rate. Currencies from Malaysia to Russia weakened as investors reassessed holdings of emerging-market assets amid China’s devaluation.
“It’s been quite a turbulent week,” said Benno Galliker, a trader at Luzerner Kantonalbank AG in Lucerne, Switzerland. “We need to find a new balance. It has much to do with data coming out of the US, and the focus will come back to what the Fed will do.”
The Standard & Poor’s 500 Index added 0.2% at 09:58 in New York. The dollar erased declines, while the yield on 10-year Treasury notes climbed to 2.21% after data showed higher wholesale prices and a pickup in industrial production.
Oil was poised for its seventh weekly decline amid signs a global glut will be prolonged.
China’s yuan halted a three-day slide after the central bank raised its reference rate for the first time since Tuesday’s devaluation and said it will intervene to prevent excessive swings. The onshore spot rate was little changed at 6.3912 per dollar, after falling almost 3% this week.
Malaysia tumbles
Malaysia has borne the brunt of a selloff in emerging markets this week, with the ringgit plunging as much as 2.8% to the weakest since August 1998. Concern has grown the nation is running out of ammunition to defend its currency as oil declines and a political scandal involving Prime Minister Najib Razak grows.
Turkey’s lira weakened to a record as the country faced the prospect of a second general election this year.
West Texas Intermediate oil was little changed at $42.25 a barrel, heading for the longest run of weekly declines since January.
The global surplus will last through 2016, the International Energy Agency said Wednesday, while OPEC reported that output climbed last month to the highest level in more than three years.
The Bloomberg Dollar Spot Index was little changed after dropping 0.2%. Factory production rose more than economists forecast in July on record automobile assembly, indicating American manufacturing is regaining its footing after a slowdown. Wholesale prices in the US climbed at a slower pace in July.
Government bonds stabilized in developed markets after rallying earlier in the week. Germany’s 10-year bund yield was little changed at 0.63%, down from 0.66% at the end of last week. Britain’s 10-year gilt yield climbed two basis points to 1.86%.
The yield on 10-year Treasury notes was at 2.18%.
