LONDON (Reuters) - Chinese stocks fell almost 4 percent and alarm bells rang across global markets on Tuesday, as the trade dispute between the United States and China escalated further.
The yuan also hit a five-month low overnight after U.S. President Donald Trump’s threat to impose a 10 percent tariff on another $200 billion of Chinese goods drew warnings from Beijing about $50 billion of retaliatory penalties on U.S. goods.
Asian stocks wilted to a four-month low and Australia's dollar AUD=D4 and South Africa's rand ZAR= were among a diverse group of currencies caught in the crossfire. [FRX/][EMRG/FRX]
Europe’s main equity benchmarks [.EU] sank 1 to 1.5 percent in early trading and Wall Street futures were pointing to similar falls there later, while safe-haven government bonds and the Japanese yen rallied as investors sought protection.
“You only have to look at how far the main Shanghai index has fallen to see that people would probably want some safe-haven assets at this point,” said DZ Bank analyst Andy Cossor.
China had warned it will take “qualitative” and “quantitative” measures if the U.S. government publishes an additional list of tariffs on its products.
The trade frictions have unnerved financial markets, with investors and businesses increasingly worried that a full-blown trade battle could derail global growth.
“Trump appears to be employing a similar tactic he used with North Korea, by blustering first in order to gain an advantage in negotiations,” said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo.
“The problem is, such a tactic is unlikely to work with China.”
