Didn't take long for the Chinese to undo the "great" commodity rally from yesterday, by making it more expensive to import goods through the devaluation announced last night.
Yesterday the bulls had three things going for them:
- Higher commodity prices
- Higher Chinese stock market and
- Lower dollar.
This yuan move -- a desperate act by the Chinese to somehow jump-start exports, no doubt to take advantage of a rebound in Europe -- is going to be viewed by our stock market as a repeal of all three of the props this market had yesterday.
Remember, $43 is the level where oil has to hold. The CurrencyShares Euro ETF (FXE) is around $106. The Chinese stock market? The fact is that it tried to rally and failed.
I tried yesterday to show that the rally was a "minor" chord rally in a "major" chord selloff, and had more to do with the market being oversold than anything else.
Someone might try to paint a positive on the yuan spin, saying that if China does better maybe the world can do better.
But the truth is that if you sell into China, say, with Iphones or autos, you just got a tariff put on you by the Chinese government.
It's not a big one, but it's not glacial either, because the 1.86% move on the renminbi daily reference rate is five times the typical move we have seen in the last decade.