Asian stocks fall after China retaliates in trade war with US


"China's countermeasures have shown our determination to safeguard the multilateral trade system".

President Trump tweeted on Monday that Beijing will be "hurt very badly if you don't make a trade deal, " recognizing that business would be required to leave the country without an agreement.

Among concerns for stock investors, a collapse of U.S. European equities and U.S. futures are posting relief rallies on Tuesday morning.

In Europe, London's FTSE 100, Germany's DAX and the Paris CAC 40 were up by between 0.5 and 1.1 per cent by about 6:15 a.m. ET.

Stocks closed sharply lower Monday as an escalating trade war between the USA and China rattled Wall Street. Caterpillar and Boeing shares were up around 1.7 percent.

Gold is another investment that tends to do fade when investors are feeling more optimistic, and it fell $5.50 to settle at $1,296.30 per ounce.

The latest round of US-Chinese trade negotiations ended in Washington on Friday without a deal. "But the hopes for that are a bit misplaced now", he said. The sector was lifted by shares of iPhone maker Apple Inc (AAPL.O), Microsoft Corp (MSFT.O) and chipmakers, all of which took a hard hit on Monday as they rely on China for a large part of their revenue. Bank of America dropped 4.6% and JPMorgan Chase fell 2.9%.

"No one wins from a trade war, although China stands to lose more", said Chen Zhao, chief global strategist at Alpine Macro, in a note to clients.

Wheat, corn and soybean products are among the worst affected by the recent Chinese tariffs, and private buyers have opted simply not to buy them from the US.

Mr. Trump, unbowed, said the US could up the ante by imposing import taxes on another $325 billion worth of Chinese goods.

'I think this is going to last for a while.

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The broad-based S&P also fell 2.4 per cent to 2,811.87, while the tech-rich Nasdaq Composite Index tumbled 3.4 per cent to 7,647.02.

US Treasury yields fell to six-week lows, with 10-year yields falling below those of three-month bills, an inversion seen by many as a potential harbinger of recession. They were trading around $9 a bushel last month and are now at their lowest price since December 2008.

The escalating trade war threatens to spoil an expected earnings recovery in the second half, however. A sustained inversion of this part of the yield curve has preceded every US recession in the past 50 years. Equities received a lift after President Donald Trump suggested a trade deal with China could still arrive in the next few weeks.

"If China did start to (sell Treasuries) it will galvanise both sides of politics in the US against China and the Fed would be sent into the market to buy bonds", Greg McKenna, strategist at McKenna Macro said in a note to clients.

Beijing is running out of USA imports to penalize due to their lopsided trade balance.

The dollar rose to 109.64 Japanese yen from 109.34 yen late Monday. Hang Seng Index futures earlier climbed 0.3%.

China's offshore yuan hit a fresh 2019 low early in Asia on Tuesday before rebounding.

Volume on US exchanges was 6.62 billion shares, compared to the 7.01 billion average over the last 20 trading days.

Elsewhere, oil advanced as Saudi Arabia reported drone attacks on pumping stations, throwing the supply outlook into doubt.

USA crude was 0.3% higher at $61.23 per barrel while Brent crude gained 0.4% to $70.49 per barrel.