Global shares, oil drop after Trump tariff threat
Global financial markets reeled on Monday after US President Donald Trump unexpectedly jacked up pressure on China to reach a trade deal in the midst of negotiations, saying he would hike US tariffs on Chinese goods this week, ONAreports citing Reuters.
Equity markets, which have been largely expecting the two sides to reach a trade agreement soon, fell sharply as further talks to end their bruising trade war were thrown into doubt.
The trade war has resulted in billions of dollars of losses for both sides, while inflicting collateral damage on export-reliant economies and companies from Japan to Germany.
Chinese shares plunged more than 6 percent, while US stock market futures fell 1.6 percent. Oil prices sank and the Chinese yuan weakened sharply.
The rout is set to continue in Europe. Financial spreadbetters expect Frankfurt’s DAX to open 1.7 percent lower at 12,207, and Paris’ CAC to open down 1.6 percent at 5,462. London is closed for a bank holiday.
Trump sharply escalated tensions between the world’s two largest economies with tweeted comments on Sunday that trade talks with China were proceeding “too slowly”, and that he would raise tariffs on $200 billion of Chinese goods to 25 percent on Friday from 10 percent.
He also said he would target a further $325 billion of Chinese goods with 25 percent tariffs “shortly”.
The tweets upended the previously calm market mood that had benefited from signs of improving economic growth in China and the United States, and from comments from Trump and other senior US officials that trade talks were going well.
The Wall Street Journal reported on Monday that China was considering canceling trade talks scheduled for this week following Trump’s threats. Conflicting later reports on Chinese Vice Premier Liu He’s travel plans added to market confusion.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.9 percent in afternoon trade as markets across the region fell deep into the red.
Chinese blue-chips were down more than 6 percent, having closed higher before a three-day national holiday amid expectations that pressures on China’s economy were easing.
The drop in Chinese shares came despite a move on Monday by China’s central bank to cut reserve requirements for small banks to help boost lending to small and private firms.
Australian shares were off 0.8 percent.
Japanese financial markets remain closed until Tuesday for a national holiday, but Nikkei 225 futures were down 1.9 percent at 22,075, off the day’s lows.
E-Mini futures for the S&P 500 slid 1.6 percent, erasing memories of gains on Friday after the US payroll data had helped to lift Wall Street, and signaling a rough open for US stocks on Monday.
In commodity markets, Trump’s tweets sparked a plunge in oil prices. US crude at one point dropped as much as 3.1 percent to a more-than-five-week low, before bouncing to $60.51 per barrel – still off 2.3 percent on the day.
Brent crude was 2.2 percent lower at $69.28 per barrel.
The tweets have compounded pressure on prices amid signs of a rise in US output, which has surged by more than 2 million barrels per day since early 2018.
Spot gold jumped 0.25 percent to trade at $1,282.20 per ounce.
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