Global stock markets tank as trade tensions fester

LONDON: World stock markets had another dire session Thursday as heightened China-US trade tensions before make-or-break talks in Washington had investors rushing for the exits, dealers said.

The two-day gathering has taken on huge significance since US President Donald Trump threatened to more than double punitive tariffs on $200 billion of imports Friday, arguing that Beijing "broke" their previously agreed commitments on trade.

Key European stock indices were up to two percent down at the close, getting no comfort from Wall Street where the Dow Jones index had fallen by another 400 points by the late New York morning.

"Stocks have endured a major sell-off... as trade tensions between the US and China have ratcheted up," said CMC Markets analyst David Madden.

- 'Not much hope' -

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"President Trump claims that China 'broke the deal', and traders have taken that as a sign that the relationship between Washington DC and Beijing is going to get worse.

"Trade discussions between the two sides will continue today, but investors are not holding out much hope," Madden added.

Oil fell amid concern about the impact of trade tensions on the global economic outlook, while the dollar slipped against all its major peers.

Trade worries were "festering as the US and China are set to resume talks, while the US has threatened to increase tariffs on Chinese goods tomorrow," brokers Charles Schwab said in a note.

But some assets, considered solid in times of crisis, continued to rise.

"Since President Trump's late-Sunday tweet, equities in the US and elsewhere have fallen sharply, the price of gold has edged higher and the Japanese yen has rallied against the US dollar," Capital Economics analyst Simona Gambarini said.

Chinese trade envoy Liu He returns to the bargaining table in the US capital later Thursday under a tense atmosphere with far-ranging ramifications for the world's two biggest economies.

- Important 48 hours -

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Beijing has rejected US accusations of backtracking and warned it would not "capitulate to any pressure" as the pair enter into eagerly-awaited negotiations.

"Hopes of a deal between the US and China were quickly dashed, albeit not squashed altogether, making the next 48 hours of talks all the more important for markets," said Craig Erlam, an analyst at OANDA.

In Asia on Thursday, Hong Kong stocks were hammered more than two percent while Shanghai ended 1.5 percent lower and Tokyo sank 0.9 percent.

For its part, Beijing said an escalation was "not in the interests of the two countries' people" but warned it would impose "necessary countermeasures" if the tariffs were more than doubled Friday.

- Key figures around 1540 GMT -

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New York - Dow: DOWN 1.6 percent at 25,553.38 points

London - FTSE 100: DOWN 0.9 percent at 7,207.41 (close)

Frankfurt - DAX 30: DOWN 1.7 percent at 11,973.92 (close)

Paris - CAC 40: DOWN 1.9 percent at 5,313.16 (close)

EURO STOXX 50: DOWN 2.0 percent at 3,347.43

Tokyo - Nikkei 225: DOWN 0.9 percent at 21,402.13 (close)

Hong Kong - Hang Seng: DOWN 2.4 percent at 28,311.07 (close)

Shanghai - Composite: DOWN 1.5 percent at 2,850.95 (close)

Euro/dollar: UP at $1.1232 from $1.1192 at 2100 GMT

Pound/dollar: UP at $1.3017 from $1.3006

Dollar/yen: DOWN at 109.54 yen from 110.10 yen

Oil - Brent Crude: DOWN 55 cents at $69.82 per barrel

Oil - West Texas Intermediate: DOWN 79 cents at $61.33