Asian stocks and yuan plummet in Sino-US trade talks; Investors wait for China's retaliation

SYDNEY (Reuters) – US and Asian stock futures tumbled on Monday amid growing concern over the ability of the United States and China to save a trade deal after the sharp rise in tariffs and tariffs. the promise of replica Beijing by Washington.

The United States and China are stalled over trade talks on Sunday as Washington has called for concrete changes to Chinese law and Beijing has declared that it will "swallow none" bitter fruit "that would be detrimental to his interests.

Investors are preparing for threatening "countermeasures" from China in retaliation for Friday's increase of US $ 200 billion worth of Chinese tariffs. This decision followed accusations by US President Donald Trump that Beijing "broke the deal" by giving up earlier commitments.

E-Mini futures for the S & P 500 lost 1.0%.

The broader Asia-Pacific MSCI equity index, excluding Japan, fell 0.5%, coming close to its two-month low, announced Thursday.

Chinese equities fell, with the Shanghai Composite benchmark and the first-rate CSI 300 losing 1.6% and 1.9%, respectively, before partially reducing losses. Hong Kong's financial markets have been closed for holidays.

Japan's Nikkei average fell nearly 1.0% to its lowest level since March 28th. It was trading for the last time down 0.5%.

The benchmark 10-year US Treasury yield dropped to 2.437%, partly as a safe haven, but also because the trade war was intensifying, putting more pressure on global growth and allowing large central banks to remain accommodative.

White House economic adviser Larry Kudlow told a Fox News program that China must accept "very strict" implementation provisions for a possible deal.

Kudlow said US tariffs would remain in place as negotiations continue and it is "very possible" for Trump to meet with Chinese President Xi Jinping at the G20 summit in Japan in late June .

"Our basic scenario remains that a trade agreement between the United States and China is likely. But today's news suggests that it could take longer and that it should not be concluded before the end of June, "said John Woods, APAC Investment Director at Credit Suisse. AG, based in Hong Kong.

Others were more pessimistic.

"Our basic scenario is China's limited progress and retaliation. We see a significant risk that all imports from China will be subject to tariffs in the coming months, "said Michael Hanson, Head of Global Macro Strategy at TD Securities.

"Market reaction will ultimately depend on continued negotiations between China and the United States, tariffs of US $ 325 billion from US imports from China, the way China responds and the consequences for human rights. automotive customs (section) 232 ".

Under this scenario, the renminbi is expected to be between 5% and 6% against the US dollar over the next three months, said Hanson, dampening the economic impact of rising tariffs.

The Chinese yuan off the coast fell to its lowest level in more than four months at 6.88 dollars a dollar. The last drop was 0.5% to 6.852 per dollar.

The other major currencies were relatively calm, the yen refuge being still supported, but not aggressively. The dollar stood at 109.75 yen, down 0.2% on the day and just above the 14-week low of 109.46.

The euro remained stable at 1.1233 USD, while the dollar moved little against a basket of currencies at 97.302.

"If negotiations between the US and China do not progress in the coming weeks, Asian currencies will be under new pressure," said Khoon Goh, head of research at ANZ Research Asia. , adding that his team did not expect the yuan will break the psychological threshold of 7 to a dollar.

"We hope everything will be fine, but our basic scenario now is that the United States and China will not reach an agreement, which means that tariffs will be increased on the rest of China's exports to the United States. United States."

In commodity markets, oil prices have remained in a relatively narrow range. US crude futures declined 0.1% to $ 61.62 per barrel, while Brent crude futures gained 0.3% to $ 70.81. [O/R]

Spot gold decreased 0.1% to $ 1,283.61 an ounce.

In contrast, digital currencies maintained most of their significant gains over the weekend.

Bitcoin surged more than 10% on Saturday and reached its highest level in nine months at $ 7,585.00 on Sunday, before reducing gains. The last quote was $ 7069.76, up 1.4% on the day.

GRAPHIC: Asian Stock Exchanges – tmsnrt.rs/2zpUAr4