Chinese stocks fell almost four per cent and alarm bells rang across global markets yesterday, as trade tensions between the United States and China escalated further.
The yuan also hit a five-month low overnight after US President Donald Trump threatened to impose a 10 per cent tariff on another $200 billion of Chinese goods. Beijing in turn warned about $50 billion of retaliatory penalties on US goods.
Asian stocks wilted to a four-month low and Australia’s dollar, South Africa’s rand and the euro were among a diverse group of currencies caught in the crossfire.
Europe’s main equity benchmarks sank one to 1.5 per cent and Wall Street futures were pointing to similar declines.
China’s falls came after it had warned it would take “qualitative” and “quantitative” measures if the US government published an additional list of tariffs on its products.
The trade frictions have unnerved financial markets, with investors increasingly worried that a full-blown trade battle could derail global growth.
Shares of plane-maker Boeing, which have acted as a proxy for US-China tensions in recent months as it is the single largest US exporter to the country, fell 2.1 per cent.
Overnight the Shanghai Composite Index had slumped nearly 5 per cent at one point to its lowest level since mid-2016.
Hong Kong’s Hang Seng also shed as much three per cent and MSCI’s Asia-Pacific index fell 1.9 per cent to its lowest since early December. The losses had intensified through the day as the rout deepened in China.
China’s economy is already clouded by a sharp slowdown in fixed asset investment growth because of the government’s de-leveraging drive, a problematic property sector, mounting debt and rising credit defaults.
Japan’s Nikkei lost 1.8 per cent and South Korea’s KOSPI retreated 1.5 per cent. Australian stocks bucked the trend and stayed steady, helped by a depreciating currency and an overnight bounce in commodity prices.
The dollar fell 0.75 per cent to 109.715 yen following Mr Trump’s tariff comments. The yen is often sought in times of market turmoil and political tensions.
Most other currencies lost against the dollar, though.
The US currency gained 0.6 per cent on the euro to a near 11-month high at $1.1554.
The skid by China’s yuan to a five-month low was its biggest fall in a year and a half. The Australian dollar, often considered a proxy for China-related trades, brushed a one-year low of $0.7381 too.
With Russia and Saudi Arabia pushing for higher output, crude oil markets remained volatile ahead of Friday’s Opec meeting.
Brent crude futures fell 0.6 per cent to $74.88 a barrel after rallying 2.5 per cent overnight, while US light crude futures retreated 1.4 per cent to $65.27.