Global markets judder as China hits back in trade war

AFP . New York | Update:

A container ship sits docked at the Port of Oakland on 13 May in Oakland, California. Photo: AFPChina's move to retaliate against the latest US tariffs pummeled global stocks on Monday, with Wall Street suffering an especially bruising blow amid fears the year-long conflict could deteriorate further.

The Nasdaq experienced its worst day of 2019 after Beijing announced it would increase tariffs on $60 billion worth of US goods from 1 June, striking back after US-China trade talks ended last week with no agreement and after Washington raised tariffs and signalled it could impose additional levies on Chinese goods soon.

The editor of the party-owned Chinese newspaper Global Times said on Twitter Beijing could take additional actions, including dumping US Treasuries, ending US agricultural purchases and reducing orders for Boeing airplanes.

"A US-China trade deal was pretty much priced into the market," said Sam Stovall, chief investment strategist at CFRA Research. "Now who knows what has to be accomplished before a deal can be reached?

"That is causing investors to bail out and say 'I don't know what is going to happen.'"

US stocks opened sharply lower and fell further later in the session. The Dow lost more than 615 points, or 2.4 per cent, to finish at 25,324.99, its lowest close in more than three months.

Paris and Frankfurt both lost more than one percent, while London suffered more modest declines.

Earlier, Asian markets had begun the day in underwhelming fashion in Asia, as the lack of a US-China trade deal after last week's talks in Washington jarred markets.

Both sides have indicated that discussions will continue, although no date has been set for the next round of talks, which will be held in Beijing.

Despite Monday's drop, markets still believe a deal is likely, said Pantheon Macroeconomics' Ian Shepherdson.

"If markets were to believe wholeheartedly that the trade talks with China will break down and that the US will impose tariffs on all Chinese imports, as the president has repeatedly threatened, the index would be much lower," he wrote in a note.

The flare-up in trade conflict also weighed on the oil market, which had initially been propelled Monday by mounting tensions in the oil-rich Middle East.

Saudi Arabia said that two of its oil tankers were damaged in mysterious "sabotage attacks."

Riyadh, Tehran's regional arch-rival, condemned "the acts of sabotage which targeted commercial and civilian vessels near the territorial waters of the United Arab Emirates," a foreign ministry source said.

Tehran called for an investigation into Sunday's "alarming" attacks off the Emirati coast and warned of "adventurism" by foreign players to disrupt maritime security.

But crude finished Monday's session lower on worries that the trade war could slow global growth, denting oil demand.

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