Stocks tumble as Trump trade threat reverberates

Bloomberg

Equities slumped globally and Treasury futures climbed with other haven assets after President Donald Trump’s threat to increase tariffs on Chinese imports called into question the chances of a resolution to the trade war. The yen rose while crude oil slid.
Futures on the S&P 500 index sank as much as 2.2 percent, signalling a punishing start to the week on Wall Street after Trump tweeted a plan to hike tariffs this coming Friday. The VIX gauge of US stock volatility headed for its biggest increase in 2019. European equities slid and the benchmark index in Shanghai tumbled
5.6 percent, even after Chinese state-backed funds were said to have been active in an effort to limit the sell-off.
With cash markets for Treasuries closed due to holidays in Tokyo and London, futures on the world’s benchmark bonds jumped the most in more than one month. European government debt was steady as economic activity in the euro area showed signs of stabilisation.
Seeking to ramp up pressure on China for more concessions, Trump threatened in two tweets to more than double tariffs on $200 billion of Chinese goods and impose a fresh round of duties on top of that. Talks were expected to resolve the year-long trade standoff appeared to be on life-support on Monday, with Beijing struggling to fully respond.
China’s foreign ministry said that officials were still planning to travel to the US for the next round of talks, but it was unable to confirm when amid signs that a delay is now being considered.
“It’s making the outcomes more binary, with everybody focussed on the Friday deadline — there doesn’t seem to be much leeway now to much go past that,” Joyce Chang, chair of global research at JPMorgan Chase & Co, said on Bloomberg Television.
Adding to a complex global picture, North Korea carried out a weapons test that potentially included its first ballistic missile launch since 2017, challenging Trump’s bottom line in nuclear talks.
In commodities markets, West Texas Intermediate crude futures declined as much as 3.1 percent before paring the drop to 1.3 percent.
Chinese Vice Premier Liu He is scheduled to return to Washington for trade talks on Wednesday, though the schedule may now be in flux. The Reserve Bank of Australia meets to set interest rates on Tuesday, while New Zealand central bank does the same the following day. China releases trade data Wednesday, and the US does so on Thursday. South Africa holds national elections on Wednesday. China reports on inflation on Thursday. The US releases the April CPI report on Friday.
Futures on the S&P 500 Index sank 1.7 percent in New York, headed for the largest tumble in more than six weeks. Europe’s Stoxx 50 Index dropped 2 percent, set for its biggest drop in five months. The Shanghai Composite Index plunged 5.6 percent with the first retreat in a week. The MSCI Asia Pacific Index sank
1 percent on the biggest dip
in six weeks. The MSCI Emerging Market Index slumped
1.5 percent.
The Bloomberg Dollar Spot Index climbed 0.3 percent, headed for the biggest increase in more than a week. The euro fell less than 0.05 percent. The offshore yuan sank 0.7 percent on the biggest dip in nine months. The Japanese yen advanced 0.3 percent to the strongest in more than five weeks. The Australian dollar slipped 0.4 percent to 0.699 per dollar, the weakest in more than four months.
Germany’s 10-year yield dropped one basis point to 0.01 percent. The yield on France’s 10-year bonds declined less than one basis point to 0.369 percent. Italy’s 10-year yield increased four basis points to 2.598 percent. Gold rose 0.2 percent to $1,281.82 an ounce. West Texas Intermediate crude fell 1.3 percent.