Stocks plunge amid US-China trade war

Global stock markets had their worst day in months on Monday as an escalating trade war between the United States and China rattled investors.

The S&P 500 slumped 2.4%, the Dow Jones Industrial Average dropped 2.38% and the technology-heavy Nasdaq closed down 3.41% after China said it would impose retaliatory tariffs on US goods.

The pan-European STOXX 600 index lost 1.21%, while the MSCI's global equity index fell 1.9% to reach a two-month low.

The slide came after China announced it would increase tariffs by up to 25% on $60 billion (€53 billion) worth of US imports starting on June 1, hitting back at the United States after President Donald Trump on Friday raised tariffs on $200 billion in Chinese imports from 10% to 25%.

Trump had warned Beijing not to retaliate, but on Monday said he would meet with Chinese President Xi Jinping for what he expected would be "very fruitful" talks next month at the G20 in Japan.

Investors pare back gains, pile into safe havens

Investors had anticipated a US-China trade deal before talks collapsed last week, sending major indexes on Wall Street up since the start of the year. The S&P 500 is up 12.2% since January, the Dow is up 8.6% and the Nasdaq is up 15.2%.

"The market has been looking around for an excuse to correct. We were straight up from Christmas," Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, told the Reuters news agency. "We now have an excuse to have a correction."

Technology and industrial companies, which are exposed to China and would suffer in an extended trade battle, bore the brunt of Monday's sell-off.

The Chinese yuan also weakened to its lowest level against the greenback since December 24.

Investors piled into safe-haven assets, including US Treasuries and the Japanese yen.

The 10-year Treasury yield dropped to 2.4%, falling below three-month bills, the second time in under a week the yield curve has inverted. A yield inversion — when shorter-dated yields are higher than longer-dated yields — has historically been a warning sign of a recession.

cw/cmk (AFP, AP, Reuters)

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