Shares, emerging market currencies steady after mauling

LONDON: Bruised world shares and emerging market currencies fought to regain their footing on Thursday, after China said it will hold trade talks with the United States later this month and Turkey's lira continued its recovery run.

Asian equities had hit one-year lows overnight as they tracked Wednesday's global falls and Tencent results disappointed, but a fresh high for London's FTSE and modest gains elsewhere pulled Europe and Wall Street futures up.

At the same time a dip in the dollar, the sight of the lira moving back to 5.8 per dollar and a higher Chinese yuan also steadied emerging market currencies such as South Africa's rand, Russia's rouble and Mexico's peso.

Emerging market stocks did nudge lower again, though, after they had crossed the 20 percent peak-to-trough threshold that defines a 'bear' market. Metals markets also clawed higher, however, after copper had also entered 'bear' territory.

"The Chinese are heading to Washington and yuan bounced, the Qataris are heading to Ankara and the lira bounced and that has left everything else floating around really," said Societe Generale's global head of currency strategy Kit Juckes.

He added that it was still too early to sound the all clear around Turkey - its new finance minister and son-in-law of President Tayyip Erdogan was about to hold a global conference call - and that the broader worries were still around the extent of China's economic slowdown.

China on Thursday said a delegation led by its vice commerce minister would travel to the United States for talks in late August at the invitation of Washington.

Hopes that it could ease trade tensions helped Chinese stocks pare losses, with both Shanghai Composite Index and Hong Kong's Hang Seng index each down 0.8 percent. Earlier in the day, Shanghai was down as much as 1.9 percent while Hong Kong was off 1.7 percent.

Japan's Nikkei average closed 0.1 percent lower in choppy trade, with the benchmark falling as much as 1.5 percent before a brief swing into positive territory on China news.

The euro rose 0.2 percent from a 13-1/2 month low and the offshore Chinese yuan gained 0.8 percent following the Sino-U.S. trade talk news. U.S. stock futures jumped 0.5-0.8 percent.

"The news (of the China-U.S. trade talks) triggered short-covering but I think fundamentally it is of limited significance," said Yasuo Sakuma, chief investment officer at Libra Investments.

He said Turkey's market swings reflect the fact that it is one of the more vulnerable parts of the global economy at this stage in the interest rate cycle, as the Federal Reserve seeks to normalise U.S. monetary policy.

VIDEO GAME NASTY

However, Sakuma noted there were arguably larger risks for investors, such as the weak earnings from Tencent Holdings. .

The Chinese tech giant reported its first quarterly profit fall in nearly 13 years on weak gaming revenue. It holds a 40 percent stake in the U.S. firm that makes cult game Fortnite. While that may be booming, China's regulator this week has signalled it is clamping down on some of these types of games.

That had knocked other Asian tech firms with South Korea's Samsung Electronics, Asia's third largest firm by market capitalisation, down to a one-year low.

Back in Europe, Italy's stock market sank 1.6 percent to its lowest level since April 2017 as motorway operator Atlantia fell 20 percent. The Italian government said it could be heavily fined or stripped of its contracts following the deadly collapse of a bridge in Genoa.

Though metals strengthened, oil prices were also left flat after data showed a surprise weekly increase in U.S. crude stockpiles, compounding worries about a weaker global economic growth.

Brent was at just over $71 a barrel and U.S. crude oil  last stood at $65.17, having fallen to two-month lows of $64.42, following Wednesday's 3.2 percent fall.

On the bond market, the tentative recovery in risk appetite also saw yields on German Bunds and U.S. Treasury, regarded as safe investments in times of trouble, nudge up.

"The overnight news that the Chinese are sending a delegation to the U.S. is helping support risk sentiment," said ING strategist Martin van Vliet.