By Marketwatch and The Wall Street Journal
China stocks suffered their worst one-session loss in more than two years, as Asian stock markets plunged Monday on fears trade negotiations between the U.S. and China were on the verge of collapse.
On Sunday, President Donald Trump tweeted that he would raise tariffs on $200 billion of Chinese goods from 10% to 25% this week, apparently taking Chinese officials by surprise. In response, China may withdraw from the next round of trade talks scheduled to begin Wednesday in Washington. U.S. officials had indicated progress had been made at talks last week in Beijing, and said it was possible a deal could be reached by the end of this week.
But the sudden hard line by Trump spooked investors. U.S. stock market futures sank, with Dow Jones Industrial Average futures , S&P 500 futures and Nasdaq Composite futures all falling around 2% by Sunday and into Monday.
Just ahead of Shanghai’s open, China’s central bank made a move to stimulate the economy by cutting reserve requirement ratios (RRRs) for 1,000 rural commercial banks, which will make it easier for small and micro companies to borrow.
The worst losses in Asia were seen in China, with the Shanghai Composite /zigman2/quotes/210598127/delayed CN:SHCOMP -0.12% closing down about 5.6%, which marked its worst one-day loss since a 6.4% slump in February 2016. The smaller-cap Shenzhen Composite /zigman2/quotes/210598015/delayed CN:399106 -0.23% plunged 7.4%, also the worst one-day percentage fall since February 2016. Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -0.32% fell 2.8%.
Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO +1.51% closed down 0.8%, Taiwan’s benchmark fell nearly 1.8% and Singapore’s /zigman2/quotes/210597985/delayed SG:STI +0.88% key index dropped 3.2%. Japan’s Nikkei and South Korea’s Kospi were closed for holidays.
The decline in Shanghai, which came after an extended market holiday last week, was led by port and shipping companies like Ningbo Zhoushan Port Co. /zigman2/quotes/206550113/delayed CN:601018 -2.81% and China Merchants Energy Shipping Co. /zigman2/quotes/209502831/delayed CN:601872 +0.17% , which both fell by close to the maximum 10% daily limit.
In Hong Kong, Geely Automotive /zigman2/quotes/200716015/delayed HK:175 -0.78% , food processor WH Group /zigman2/quotes/204247792/delayed HK:288 -0.94% and Apple supplier AAC Technologies /zigman2/quotes/201441510/delayed HK:2018 -1.19% were among the biggest decliners. CSPC Pharmaceutical /zigman2/quotes/200847219/delayed HK:1093 -2.88% and China Life Insurance /zigman2/quotes/202359856/delayed HK:2628 -0.58% also sank. Apple manufacturer Foxconn /zigman2/quotes/204111604/delayed TW:2354 +0.20% and Taiwan Semiconductor /zigman2/quotes/207385621/delayed TW:2330 +0.24% dropped in Taiwan. In Australia, Beach Energy /zigman2/quotes/200513631/delayed AU:BPT +3.79% and Westpac Banking /zigman2/quotes/203084975/delayed AU:WBC +7.39% fell.
“Arguably, Trump’s threat to lift tariffs ‘shortly’ if Beijing does not play ball on U.S. trade demands, may be more a negotiations tactics than an imminent trade action,” Mizuho Bank said in a commentary. “Nonetheless, Trump’s tweet allusions to tariffs being ‘partially responsible for ... great (U.S.) economic results’ does raise the threat of misguided trade policy” from the U.S, it said.
After posting a second straight losing week Friday, crude oil prices continued to fall Monday. U.S.-based West Texas Intermediate crude for June delivery was down nearly 2% and global benchmark July Brent crude fell by almost as much.