Stock markets fell Monday on trade war tensions as the US was preparing to impose hefty tariffs on a range of Chinese imports.
Oil prices retreated after US President Donald Trump tweeted at the weekend that Saudi Arabia’s King Salman had agreed to his request to open crude oil taps wider.
On currency markets, the euro dropped on worries about the future of German Chancellor Angela Merkel’s coalition government as tensions over migrant policy boiled over.
“Investors continue to be fearful about the global trade situation,” said David Madden, analyst at CMC Markets UK.
“Uncertainty regarding German politics is playing into the decline,” he added.
European markets were up to one percent lower by mid-afternoon, off the day’s weakest levels.
Wall Street also came off to a lower start.
Trade war fears have rattled markets across the world, particularly China’s which are now in bear territory having fallen 20 percent from their recent highs.
“China’s economy will slow down for the rest of the year, but we don’t need to worry about any stall yet,” said Zhu Qibing, chief macroeconomy analyst at BOC International China in Beijing.
“The key is how international trade and the dispute between China and the US will evolve.”
US levies on billions of dollars of goods due Friday come after data at the weekend showed Chinese manufacturing activity slowed in June as the world’s number two economy shows signs of struggling.
On Monday, Shanghai’s stock market dived 2.5 percent, while the yuan extended a retreat that has led some observers to suggest the country’s central bank is weakening the unit to offset the impact of a trade war.
While China is a key target in Trump’s protectionist America First agenda, he has also set his sights on allies including the European Union and Canada, which on Friday imposed hefty tariffs on US$12.6 billion of US goods in retaliation for US measures on aluminium and steel.
Tokyo’s stock market meanwhile tumbled 2.2 percent Monday, also as a closely watched gauge of Japanese business showed sentiment was softening.
Earlier, the Bank of Japan’s Tankan report — a quarterly survey of about 10,000 companies — showed a dip in confidence from the previous three months, though economists pointed out that it is still around its highest level in more than a decade.
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