A gauge of global equity markets slumped yesterday amid unease over the impact of the escalating US-Sino trade war on China’s growth, while the dollar gained versus the euro and Italian bond yields spiked on the ongoing spat over Italy’s budget plans.

European markets slid, with defensive stocks under pressure as investor confidence took a knock from last week’s spike in Treasury yields and amid heightened expectations for further interest rate hikes by the Federal Reserve.

The pan-European FTSEurofirst 300 index lost 1.15 per cent and MSCI’s gauge of stocks across the globe shed 0.44 per cent.

The US Treasury said it was concerned about China’s currency depreciation and that it was monitoring developments with the yuan, according to CNBC.

Beijing moved over the weekend to spur more lending. Spot yuan slid to its lowest official close in seven weeks against the dollar on expectations of more easing by China.

Chinese stocks fell in their biggest one-day drop since February after markets re-opened following a week-long holiday in China, with the Shanghai-Shenzhen CSI 300 index down more than 4 per cent for only the second time in more than 30 months.

For the year, Chinese indexes are down about 18 per cent.

Wall Street traded lower on a day the US bond market was closed because of the Columbus Day holiday. The Dow Jones fell 43.89 points, or 0.17 per cent, to 26,403.16. The S&P 500 lost 3.5 points, or 0.12 per cent, to 2,882.07 and the Nasdaq Composite dropped 27.27 points, or 0.35 per cent, to 7,761.17.

Yields on the 10-year note were at seven-year highs, after a solid jobs report raised the specter of faster interest rate hikes.

Gold fell more than 1 per cent as investors sought refuge in the dollar, which has been lifted by recent strong US economic data that have reinforced rate hike expectations.

Gold is down more than 12 per cent from an April peak largely due to a strong dollar, which reflects a vibrant US economy, rising US rates and fears of a global trade war.

US gold futures fell 1.31 per cent to $1,189.80 an ounce.

The dollar index rose 0.27 per cent, with the euro down 0.42 percent to $1.1475. The Japanese yen strengthened 0.50 percent versus the greenback at 113.16.

Oil dropped to around $83 a barrel, pressured by expectations that some Iranian oil exports will keep flowing after the US re-imposes sanctions, easing a strain on supplies.

US crude fell 64 cents to $73.70 per barrel and Brent was last down 79 cents at $83.37.

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