Stocks plunged Monday on Wall Street as traders worried that about how much President Donald Trump’s escalating trade war with China will damage the U.S. economy.
The Dow Jones Industrial Index was down 767 points before the end of trading, near the level of its biggest one-day selloff ever.
That record loss, just 10 points greater than Monday’s, came a month ago – one of a series of corrections that the White House has brushed off as aberrations in an otherwise strong market trend.
China let its currency, the yuan, drop to its lowest level against the dollar in more than a decade nefore trading started Monday in New York, a move that Trump railed against as ‘currency manipulation.’
A weaker yuan and a stronger dollar pose challenges for U.S. companies that do substantial business in China, as it effectively raises the cost of their goods for Chinese customers.
The Dow Jones Industrial Average was off more than 767 points on Monday, a near record for a single day’s losses
Global shares fell sharply Monday after China let its currency to sink to an 11-year low against the dollar, fueling concern that Beijing is using the yuan as a weapon in an escalating tariff war with U.S. President Donald Trump
The president is angry at Chinese central bankers for driving the yuan downward, and insists that the Chinese economy will ultimately bear the brunt of his tariffs – not the American consumers who will face higher retail prices for nearly everything
Tech stocks posted similar losses on Monday, including a 3.47 per cent slide for the NASDAQ index.
Apple Computer too a 5.23 per cent loss for the day, wiping $44.8 billion off its market value. Analysts had warned that a new round of tariffs proposed by President Donald Trump may hurt demand for the iPhone.
The president threatened tariffs last week on about $300 billion of Chinese goods, a move that would extend import duties across almost all Chinese imports.
The escalations in the trade war between the world’s largest economies are rattling investors already unnerved about a slowing global economy, falling U.S. corporate profits and possibly too-weak inflation.
Trump also suggested Monday that the Federal Reserve, which announced a modest interest rate cut last week, should respond to Chinese currency fluctuations with more aggressive action.
The NASDAQ and S&P 500 indexes took nose-dives on Monday
The Dow shed more than 500 points in the first half-hour after the opening bell and never recovered on Monday
Trump suggested the Federal Reserve, which announced a modest interest rate cut last week, should respond to Chinese currency manipulation with aggressive action
‘Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!’ he said an hour before the opening bell.
The benchmark S&P 500 slid 2.96 per cent on Monday, on track for its biggest one-day percentage decline since February 2018. It has fallen for six straight sessions.
China’s central bank allowed the yuan’s exchange rate to sink below the politically sensitive level of seven per dollar.
That level has no economic significance on its own but will fuel trade tensions with the U.S. government, which complains a weak Chinese currency swells the country’s exports and hurts foreign competitors.
A man walks past an electronic stock board showing Japan’s Nikkei 225 index at a securities firm in Tokyo on Monday. Asian stock markets fell for a third day after China allowed its yuan to sink to its lowest level
‘Markets will brace for trade tensions to boil,’ said Vishnua Varathan of Mizuho Bank in a report.
The People’s Bank of China blamed the decline on ‘trade protectionism,’ a reference to Trump’s tariff hikes in a fight over Beijing’s trade surplus and technology policies.
Trump rattled financial markets with a threat Thursday to raise duties on additional Chinese imports. He says he will put 10 per cent tariffs on the remaining $300 billion of untaxed Chinese goods without a deal.
U.S. negotiators say they were close to a deal until China backed away from major provisions. Trump’s administration says the deal fell through after the president’s leading competitor’s labeled Beijing a limited threat to the U.S. economy.
Since then, the trade war between the U.S. and China has re-escalated.
Beijing appears to have decided ‘the currency is now also considered part of the arsenal to be drawn upon,’ said Robert Carnell, analyst at bank ING.