Stock markets recoiled yesterday as China retaliated in an escalating trade war with the United States, leaving investors reluctant to take positions in anything but the safest of assets.

US shares rose on Tuesday on the view that President Donald Trump’s Twitter attacks on retailer Amazon would not translate into actual policy.

Yet trade worries were never far away. Late on Tuesday, the Trump administration announced 25 per cent tariffs on $50 billion of annual imports from China, covering about 1,300 industrial technology, transport and medical products.

China responded with penalties on $50 billion of US goods ranging from soybeans, cars and chemicals to whisky, cigars and tobacco with its vice finance minister stressing the country had never given in to external pressure.

The moves triggered further heavy selling in global stock markets and commodities, with US stock futures sliding 1.4 per cent, soybean futures plunging 4.5 per cent and the dollar and China’s yuan both hit.

In Europe, London’s FTSE, Paris’s CAC40 and the export-heavy German DAX fell between 0.6 per cent and 1.2 per cent.

Mr Trump denied yesterday that the United States was in a trade war with China.

Benchmark Bund yields slipped back under 0.50 per cent, just off 2-1/2 month lows hit last week.

MSCI’s broadest index of Asia-Pacific shares outside Japan had spent most of its session dithering either side of flat before ending 0.3 per cent lower.

China’s retaliation came after trading hours for Japan’s Nikkei, which added 0.2 per cent in thin volumes and Chinese blue chips ended down 0.2 per cent.

Emerging market stocks, which have proved resilient to trade tensions, tumbled 1.6 per cent and turned negative on the year.

The dollar dropped to 106.14 yen, after edging up from a low of 105.70 on Tuesday. The euro hovered at $1.2287, after easing from a high of $1.2335 overnight, while the dollar index was 0.2 per cent lower at 90.

In commodity markets, gold jumped 0.85 percent to $1,343 an ounce, recovering some of Tuesday’s losses.

Oil prices slipped with Brent crude futures off 97 cents to $67.14 a barrel, while United States crude fell 98 cents to $62.51 a barrel.

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