Published: Sat, March 24, 2018
Markets | By Josh Butler

Markets extend falls as US-China trade dispute intensifies

Markets extend falls as US-China trade dispute intensifies

"The US' persistence in advancing the Section 301 investigation and publishing the so-called findings to pick a trade war will undoubtedly undermine the interests of American consumers, enterprises and the financial market directly", the Chinese Foreign Ministry said, a day after the US President ordered the US Trade Representative (USTR) to levy tariffs on at least $50 billion of Chinese imports. Eight of the index's 10 main groups ended lower.

Wholesale gasoline rose 2 cents to $2.04 a gallon. Canadian National Railway Co. finished 2 per cent lower at $91.05, while Ritchie Bros Auctioneers Inc. fell 2.6 per cent to $38.88.

Traders are watching medical marijuana producer stocks after the legalization bill passed a second Senate reading in Canada.

China responded by saying it was "not afraid of a trade war", and also released a list of potential tariffs on $3.0 billion worth of U.S. goods, from pork to fruits and wine and including some steel and aluminium goods. The FTSE 100 in Britain dipped 0.4 per cent. Japan's benchmark Nikkei 225 index plunged 4.5 per cent and South Korea's Kospi tumbled 3.2 per cent. Hong Kong's Hang Seng lost 2.5 per cent. Online retailer Amazon slid $36.94, or 2.3 percent, to $1,544.92.

If there is a trade war, the first shots were fired by China many years ago, US officials say, and it is Beijing that has long "gamed" the rules of the World Trade Organization for its own benefit.

And by securing an exemption from the tariffs, Europe could be perceived as taking sides with the United States against China, said Gabriel Felbermayr, an economist at the Ifo Institute, a research organization in Munich. Earlier in the session, prices touched their highest since Feb 20 at $1,343.06 USA, and were on track for their best weekly performance since the week of February 16, rising over 2%.

Fed Raises Key Interest Rate, Lifts 2019 Outlook
Federal Reserve Board Chairman Jerome Powell testifies during a Senate banking committee hearing in Washington, D.C., on March 1. The Federal Reserve voted Wednesday to lift its federal funds rate by 25 basis points to a range of 1.50% to 1.75%.

Nike closed slightly higher, retreating from strong early gains which followed an upbeat earnings report Thursday and despite the departure of a senior executive for bad behaviour. While German bond yields recovered in European trading, they suffered their biggest two-week drop since November.

In times like these, with trade tensions threatening all-out war, investors run to gold. The dollar fell to 104.82 yen from 105.61 yen.

The dollar index, tracking it against other major currencies, fell 0.4 per cent. They have made enormous gains over the a year ago, but since they do so much business outside the USA, investors see them as particularly vulnerable to the effects of a trade dispute. Dow futures were recently signaling a flat open.

There was little positive reaction meanwhile to the United States saying late Thursday it would suspend duties on metals imports from the EU, Argentina, Australia, Brazil, Canada, Mexico and South Korea.

The price of oil climbed $1.58, or 2.5 percent, to $65.88 a barrel in NY.

However, such an aggressive move from the United States could well backfire should talks break down or fail to materialize altogether. It will be interesting to see if they continue to support him in next elections. News of the tariffs, however, derailed years of structured dialogue between China and America, during which they have sought to reach agreements on various economic and security issues. Trade jitters could also hit oil markets, but most analysts said other bullish factors outweighed them for now.

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