U.S. Stocks Decline as Yen, Gold Gain after Yuan Fixing

The global equities rally that sent benchmark gauges in America and Europe came to an end on Tuesday after the People’s Bank of China lowered the yuan’s reference rate. The move spiked demand for haven assets, pushing gold and the yen higher. Treasuries continued their decline for the third straight session. U.S. crude fell to below $33 a barrel after Iran called the proposal to freeze oil output “ridiculous.”

The spike in demand for haven assets is yet another indication that China still has the power to disrupt relatively calm markets, which led to a rebound in stocks and commodities over the last week. The reduced reference rate was higher than many analysts predicted, and was the largest cut since January’s string of reductions that ignited fears of a global currency war.

In the U.S., the S&P 500 dropped 0.4% in morning trading, ending Monday’s rally that brought the index to a six-week high. Since its record high in May, the index has dropped over 9%, and is down 5% so far this year. Investors continue to be concerned that China’s weakening economy will hinder global growth, and lenders will see losses as energy producers struggle to stay afloat amid low oil prices.

New housing data shows that sales of existing homes rose in January to the second-highest pace in eight years. A tightening labor market, low mortgage rates and higher wages are attracting home buyers, including first-time buyers.

In a separate report, the consumer confidence index fell 9.2% in February, down from 97.8 in January.

In Europe, the Stoxx Europe 600 fell 0.3%, paring recent losses. BHP Billiton Plc (LN: BLT) lowered its payout for the first time in 15 years, and Standard Chartered Plc (LN: STAN) posted a surprise loss, a clear sign that tumbling oil and metals prices coupled with a global economic slowdown are dragging down earnings.

Oil slipped to $33 a barrel. Zinc lost 2.1% on the London Metal Exchange. Lead and copper also took a hit. Gold, on the other hand, saw a 1.1% gain to trade at $1,221.45 an ounce as investors flocked to haven assets.

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Daniel Simmons