• Yuan devaluated heavily following weak Chinese export data
• Flight to safety temporarily sends U.S. 10 year bond yield to lowest level since April
• Gold prices surge to highest in over three weeks
• Investors flee Emerging Markets, leading to depreciation in E.M. currencies
• Equity records significant losses by mid-week, though U.S. markets see some recovery

July's China Foreign Trade balance data came out as a major disappointment, last week, with both imports and exports decreasing by over 8% year over year. Negative data was followed by the People's Bank of China increasing the daily fixing for the USDCNY by 1.9%, marking the largest devaluation for the Yuan in over 20 years. The Yuan's depreciation peaked on Wednesday when USDCNY recorded a level of 6.4489, close to a 4% depreciation for the Yuan since the start of the week, marking the weakest it has been vs. the USD since 2011.

The move unleased a tsunami effect in the already fragile global markets headed by some evident flight to safety. Yields of the U.S. 10 year sovereign bond slid close to 9bp on Tuesday's session. An additional 10 bp decrease on Wednesday saw the bond's yield fall as low as 2.04%, the lowest since April. Gold also enjoyed a small rush, peaking at USD 1126.89 per oz, the highest in over three weeks. Investors fleeing into safer havens also meant they're moving away from higher yield venues in Emerging Markets, thus selling their currencies – USDRUB surged over 2% 0n Tuesday, and USDBRL increased by over a percentage point during the day. The Turkish Lira saw depreciated by close to 2% vs. the Dollar during the week, not only due to the aforementioned but also as a result of coalition talks failing in the country, suggesting new elections would be necessary.

The PBOC stabilizes markets, aided by some data

The swift depreciation of the Yuan was followed by efforts by the PBOC to halt, and even reverse it somewhat. These included pledging not to promote a sharper devaluation as well as setting the Yuan's reference rate a tad stronger, at 6.3975. The Chinese currency has since appreciated somewhat vs. the USD, seeing it gain close to a percentage point from Wednesday's peak to the end of the week.

Needless to say, a Yuan's depreciation is no Greek saga, and market focus shifted away from the matter as soon as it had something else to ponder on. The ECB's monetary policy meeting minutes were conveniently released on Thursday offering a rather optimistic view of where the European economy is headed. This included saying about inflation in the zone that "a growing number of indications that a turning point might well have been reached." Eurozone GDP data released on Friday, on the other hand, reminded that the economy is still suffering from significant slack, with a mere 0.3% Quarter over Quarter increase in GDP for the Eurozone as a whole and weak prints for major European economies such as France and Germany.

Thursday and Friday benefitted from a calmer tone, leading volatility to decrease. The S&P 500 added close to 0.7% during the week from an abyss of -1.2% on Wednesday. Similarly, the Dow increased a total of 0.6% during the week. European equity, on the other hand, experienced more difficulty in recovering from the start of the week, seeing the DAX record a 4.4% loss, the CAC 40 decrease by 3.85% and the FTSE 100 shell 2.5%.