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© Reuters. FILE PHOTO: The signage is visible in front of the London Stock Exchange entrance in London
By Thyagaraju Adinarayan
LONDON (Reuters) – Global equities fell on Monday after their worst week of 2019, as hopes of an impending trade deal between the United States and China were wiped out, raising fears of a new round of restrictive measures .
The stalemate left investors preparing for retaliation from China in view of Friday's increase by Washington of customs duties on Chinese goods worth $ 200 billion. The move followed US President Donald Trump's accusations that Beijing would have reneged on previous commitments.
Trump warned China on Monday not to retaliate against an increase in tariffs it imposed last week.
Escalation could tip the US economy into recession, a risk signaled by reversing the yield curve of US Treasury bonds between the three-month and ten-year rates for the second time in less than a week .
The US curve reversed before each recession in the last 50 years. He gave a false signal just once.
"Overall, the chances of recession have increased, so equity markets will be influenced by the price," said Justin Oneukwusi, portfolio manager at Legal & General Investment Management.
Pan-European slipped 0.5%. paid 1.3%.
Chinese stocks plummeted. The benchmark and first-order indices, the CSI 300, lost 1.2% and 1.8%, respectively.
The offshore fell to its lowest level in more than four months, 6.88 for a dollar.
Trade negotiations while Washington demanded concrete changes to Chinese law and Beijing said it would not swallow any "bitter fruit" harmful to its interests.
"The market is really worried about the scale of this escalation." "The important thing is the impact on growth, and that's what the market is fearing. really, "said Oneukwusi.
White House economic adviser Larry Kudlow told Fox News that China must accept "very strict" implementation 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 continue and that Trump would likely meet with Chinese President Xi Jinping at a G20 summit held in Japan in late 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, amounting to 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 main currencies were relatively calm. The euro remained stable at 1.1234 dollar and the dollar was little changed compared to a basket of currencies at 97.270.
"We have seen fairly limited movements between currencies, despite strong rhetoric between the US and China." However, concern remains at a weaker yuan, which should be a sign harbinger for risky assets, "said Marc-André Fongern of MAF Global Forex.
Emerging market equities declined 0.9%, close to January lows. JPMorgan (NYSE 🙂 said it had reduced its risk in emerging markets for the second time in as many months on Monday as a result of the setback in US-China trade negotiations.
In commodities, oil futures have raised growing concerns over supply disruptions in the Middle East. Futures rose 1.8% to $ 71.90 per barrel and West Texas Intermediate futures rose 1.5% to $ 62.56 per barrel.
Digital currencies exceeded $ 7,000 on Monday, their highest level in nine months, while the largest cryptocurrency rally in 2019 accelerated.
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