The Second Shoe Drops on the Yuan

There has been continued fallout from China’s surprise devaluation of the yuan yesterday:

Concerns China’s economy is faltering torpedoed stocks around the world for a second day and fueled demand for the safety of gold and Treasuries.
American equities attempted a comeback in afternoon trading, as the Standard & Poor’s 500 Index trimmed its decline to 0.5 percent as of 1:25 p.m., paring a 1.5 percent slide. The rebound came too late for European stocks, which plunged 2.7 percent for the biggest one-day rout since October. China’s yuan led a slide in Asian currencies, and emerging-market shares plunged.

The dollar retreated, while Treasuries got a boost as investors speculated that the yuan’s devaluation will slow inflation globally. That led to bets that the Federal Reserve may delay raising interest rates, while a weaker U.S. currency boosted the appeal of some commodities.
“China is a big growth driver around the world, so there’s a certain risk to global growth,” said Otto Waser, chief investment officer at R&A Research & Asset Management AG in Zurich. “If the world economy turns out to be weaker, the Fed will keep an eye on the dollar.”
The S&P 500’s drop sent it careening through its 200-day moving average, a level that has halted previous selloffs this year. The gauge’s comeback has stalled at that mark.
The U.S. financial-services industry was among the worst-performing sectors as U.S. government debt rallied. Bank shares had surged in recent months amid expectations that a Federal Reserve rate increase will expand lending margins and boost profits.

The exchange rate for the yuan is now right about where it was when they removed the peg 15 years ago and started letting the yuan fluctuate within a range they found desireable.

I know that the Chinese are complaining about exports falling off but if that’s the case I want to know who the heck has stopped buying. It ain’t us