US president Donald Trump. Picture: REUTERS
US president Donald Trump. Picture: REUTERS

Global markets already caught in the crossfire of Donald Trump’s escalating trade conflict with China took yet another hit, after the US pushed ahead on Wednesday with plans to impose tariffs on an additional $200bn in Chinese goods.

Stocks and industrial metals were most affected in the wake of the news, while havens from the yen to US Treasuries reacted with modest gains.

The 10% tariffs proposed on items from clothing to television components to refrigerators further escalates a trade conflict that has helped wipe out $2-trillion in value from global stock markets in the past month, according to data compiled by Bloomberg.

"The fear is that the trade war is far from being over and tariffs will be enacted on both sides, reducing international trade and causing inflation, hurting investor sentiment," Tim Ghriskey, chief investment strategist with Inverness Counsel, said in a phone interview.

"The fear about these tariffs that the markets have is real."

Here’s a look at how various markets across the globe reacted:

Wall Street: S&P 500 and Dow Jones futures slumped as much as 1.1%.

Yuan: China’s currency weakened further, falling as much as 0.6% against the dollar in the biggest move among Asian currencies before paring losses.

Asian bourses: Stocks across China tumbled at the opening on Thursday. The Shanghai composite index dropped 1.8%.

The benchmark Hang Seng index in Hong Kong slid 1.65% and approached its lowest level since last September, led by declines in consumer companies and industrials.

Other Asian equity markets were also hit, with declines seen in Japan, Korea, Taiwan and Australia.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.1%. The index had gained for the previous two sessions, having enjoyed a lull from the trade war fears.

South Korea’s Kospi lost 0.65% and Japan’s Nikkei fell 1.4%.

Currencies: The yen spiked initially before paring gains as the session progressed.

The dollar traded at ¥111.06 on Thursday, pulling back from a nearly two-month peak of ¥111.355.

The euro fell 0.15% to ¥130.23 and the Australian dollar lost 0.6% to ¥82.32.

US Treasuries: A similar pattern was seen in Treasuries, where yields dropped on the news before recovering some of the initial losses.

The 10-year Treasury note yield fell three basis points to 2.841%, pulling back sharply from a one-week peak of 2.875% scaled the previous day.

Industrial metals: Base metals showed clear signs of stress, reflecting investors’ worries about the impact of trade tariffs on global growth and the demand for raw materials.

Three-month copper on the London Metal Exchange dropped as much as 3.8% to $6,092.50 a tonne, its lowest since July 25 last year. It was down 3% at $6,140 by 3.23am GMT.

On the Shanghai Futures Exchange, the most-traded copper fell as far as 47,800 yuan ($7,175) a tonne, its weakest since June 23 last year.

Zinc was also hard hit, with the metal dropping by its 6% downside limit in Shanghai to 20,620 yuan a tonne, the lowest since June 22 last year. It fell as much as 4.8% to $2,503 in London, the lowest since June 15 2017.

Bloomberg and Reuters

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