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By Thyagaraju Adinarayan
LONDON (Reuters) – Global equities fell on Monday after their worst week of 2019, as hopes of an impending trade deal between China and China were negated and neither of the parties has shown a willingness to move, raising fears of a new sleight of hand. prices.
The United States and China are deadlocked on Sunday over trade talks while Washington has asked for concrete changes to Chinese law and Beijing has declared that it will not engulf any "fruit" bitter "harmful to his interests.
"It looks like we're fainting, and more Trump tweets this weekend will kindle the flames for a trade war," said John Woolfitt at Atlantic Markets, a London-based firm.
The stalemate left investors preparing for the threat of retaliation from China in the face of rising Washington's Friday tariffs on Chinese goods worth $ 200 billion. The move followed US President Donald Trump's accusations that Beijing would have reneged on previous commitments.
The pan-European Stoxx 600 fell 0.7% while the futures on the S & P 500 index lost 1.3%.
Chinese stocks fell, the Shanghai Composite benchmark index and the first-order CSI 300 losing 1.2% and 1.8%, respectively, while Hong Kong's financial markets were closed during a holiday.
Japan's Nikkei average fell 1.0% to its lowest level since March 28, before closing 0.7% lower.
"The market is really worried about the scale of this escalation because we do not have all the details about what the US is going to do and about China's retaliation. the impact of growth on growth and the nature of the market is really scary, "said Justin Oneukwusi, portfolio manager at Legal & General Investment Management.
White House economic adviser Larry Kudlow told Fox News Sunday that China must accept "very strict" enforcement provisions to secure an agreement. He added that the stumbling block was Beijing's reluctance to adopt the agreed amendments into law.
Kudlow said that US tariffs would remain in place as negotiations continued and it was quite possible that Mr. Trump would meet Chinese President Xi Jinping at a G20 summit to be held in Japan at the end of the month. of June.
"The risk of a widespread trade war has increased noticeably, even though both sides still seem to want a trade deal and that negotiations should continue," said UBS economist Tao Wang. .
Washington has announced that it is preparing to raise tariffs on all remaining imports from China, worth about $ 300 billion.
"Our basic argument is that of limited progress and retaliation from China," said Michael Hanson, head of global macro strategy at TD Securities.
The Chinese yuan off the coast fell to its lowest level in over four months at $ 6.90 a dollar.
The main currencies were relatively calm, with the euro remaining stable at USD 1.1230, while the dollar was little changed compared to a basket of currencies at 97.324.
The US Treasury yield curve between the three-month and ten-year rates reversed on Monday for the second time this week, with the 10-year yield now standing at 0.0025% above the dividend yield. shorter term.
Considered a classic warning signal of an imminent recession in the United States, the curve reversed last Thursday for the first time since March.
The US curve reversed before each recession in the last 50 years. He gave a false signal just once in this time.
"Overall, the chances of recession have increased in the short term," said Oneukwusi of Legal & General.
The trade war affected emerging market equities, down 0.7%, near the January lows.
JPMorgan said it has reduced emerging markets risk for the second time in as many months on Monday, following the backlash in US-China trade talks.
In the commodities sector, oil futures have increased in the face of growing concerns over supply disruptions in the critical Middle East producing region. Futures contracts for brent rose 0.5% to $ 71.00 per barrel and those in the United States of America in Western Texas rose slightly to $ 61.73 per barrel.
In digital currencies, Bitcoin continued to grow, keeping its gains over the weekend. Bitcoin jumped more than 10% on Saturday and hit a record $ 7,585.00 on Sunday.
(Report by Thyagaraju Adinarayan, additional report by Sujata Rao, edited by Jon Boyle)
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