Stock markets around the world fell sharply and the Chinese yuan weakened to a minimum of 11 years on Monday due to fears of an escalation in the US-China trade war shook the financial markets.
China left on Monday that the CNY = yuan fell beyond the key level of 7 per dollar for the first time in more than a decade, in a sign that Beijing might be willing to tolerate further currency weakness against a growing dispute trade with the United States.
Safe haven assets, including the Japanese yen, government bonds and gold recovered when investors tried to reduce higher risk assets.
“I think there is a feeling that President Trump could try to escalate in terms of a reaction, if he thinks this was a deliberate move by the Chinese to try to weaken his currency artificially,” said Brian Daingerfield, head of exchange strategy at the G10 for the Americas at NatWest Markets in Connecticut.
Against the Japanese yen, which investors tend to buy at times of risk aversion, the US dollar fell 0.38% to its lowest level since a sudden fall in January. JPY =
Abrupt movements in the financial markets occur after US President Donald Trump surprised investors last week by promising to impose 10% tariffs on the remaining $ 300 billion of Chinese imports since 1 September. September, abruptly breaking a brief ceasefire of a month in the blunt trade war.
On Monday, the MSCI .MIWD00000PUS All Country World Index, which tracks stocks in 47 countries, extended its decline from last week to down 1.89% on the day, close to a minimum of two months.
On Wall Street, the main indexes fell strongly led by technology companies.
“The trade is following a trend in the wrong direction,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.
“Any hope of a quick resolution with China is fading rapidly.”
The Dow Jones Industrial Average .DJI fell 489.78 points, or 1.85%, to 25,995.23, the S&P 500 .SPX lost 55.68 points, or 1.90%, to 2,876.37 and the Nasdaq Composite .IXIC fell 200.40 points, or 2.5%, to 7,803.67.
The pan-European STOXX 600 index fell 2.13%, which accelerated it for its largest two-day decline in more than three years. [.EU]
Concerns about a slowdown in global growth due to a prolonged trade conflict hurt oil prices.
“The escalation of trade measures only reinforces concerns about global economic growth and, therefore, by extension, the growth of global oil demand,” said Harry Tchilinguirian, world oil strategist at BNP Paribas in London.
Brent LCOc1 crude futures fell $ 1.53, or 2.47%, to $ 60.36 per barrel, while US West Texas Intermediate (WTI) CLc1 crude futures fell 0.97 cents, or 1.74%, to $ 54.69 per barrel.
Concerns about trade prospects raised gold to a maximum of more than six years on Monday. Spot gold XAU = rose 1.12% to $ 1,456.55 per ounce.
US Treasury yields UU. They fell on Monday with 10-year yields that reached their lowest level since November 2016, as fears about the escalating trade in tensions between the US UU.
The 10-year Treasury bond yields of reference US10YT = RR fell 8.8 basis points to 1.7667%.