Dollar and stocks drop as Trump hits China with tariffs

Dollar and stocks drop as Trump hits China with tariffs

Broad measures of American equities have held up better than their Chinese counterparts, but striation within the USA markets suggests that investors anticipate steep losses in some stalwart names.

China has said it would slap a 25 percent tariff on imports of USA crude, natural gas and coal on July 6 if Washington went ahead, as planned, with its own tariffs on Chinese goods that day.

Investors sought safer investments, such as high-dividend companies like utilities and companies that make and sell household goods.

Goldman also adjusted its forecasts for the reserve requirement ratio in China and the rate on the country's seven-day reverse repurchase agreements, the tool of choice for the central bank in managing interbank liquidity, reflecting "an expectation of slightly easier policy going forward", they wrote.

In an issue that's become linked to the trade dispute, the Senate on Monday approved a defense policy bill that would block a White House plan to allow Chinese telecom giant ZTE to buy component parts from the U.S. ZTE is accused of violating trade laws by selling sensitive technologies to North Korea and Iran.

"When you get in a fight with your biggest buyer of agriculture, and the world's largest soybean buyer (China), even if (it) were to buy 20 percent less, it's a big deal", said Dan Basse, president of Chicago-based consultancy AgResource Co. The blue chip CSI300 index fell 3.6 percent to 3,621.12.

-China Business Council. Parker suggested that such steps might include delaying or denying licenses required by US companies in China.

In London, shares in British engines maker Rolls-Royce soared almost 10 percent.

The trade frictions have unnerved financial markets, with investors and businesses increasingly anxious that a full-blown trade battle could derail global growth.

Up north, Toronto's TSX dropped 78.8 points to hover at 16,304 and the Russell 2000 index of small-cap stocks lost nearly 9 points to cling to 1,683. U.S. Steel fell 3.4 percent to $34.89 while aluminum producer Alcoa declined 4.3 percent to $43.84. Asian stocks had been poised for a mixed start to trading that sees Chinese markets reopen for the first time since trade tensions with the US escalated.

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A screen displays the Dow Jones Industrial Average after the closing bell on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 19, 2018.

The rhetoric weighed on Chinese stocks on Tuesday, with the Shanghai Composite Index plunging to a two-year low and the yuan coming under pressure.

The trade spat between President Donald Trump and China is heating up, with tariff threats escalating.

The tariffs were quickly matched by China on United States exports, including lobsters and soybeans, a move that drew the president's ire. China threatened to retaliate, leading Trump to propose broader penalties.

Further market falls could also trigger a vicious cycle of selling, as a large proportion of shares in China's stock market are pledged against loans, and could potentially face margin calls, he said. The Hang Seng index in Hong Kong lost 2.8 percent.

Bond prices are rising, sending rates lower. The yield on the 10-year Treasury note fell to 2.88 percent from 2.92 percent.

US and European equity markets looked set to follow Asia into the red.

The Trump administration said Friday that it will impose a 25% tariff on $50 billion of Chinese exports.

Last week, he announced 25 percent tariffs on $50 billion in Chinese imports, prompting Beijing to retaliate with matching duties on U.S. goods. The yield on the USA 10-year Treasury fell to 2.88 percent from 2.92 percent.