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World Stocks Plummet Over Threats of Higher US Tariffs

Taking a particular hit on the trade tensions was the European auto sector, falling 1.4% and set for its seventh straight day of losses after Trump said he aimed to hike tariffs on EU car imports by 20%
World Stocks Plummet Over Threats of Higher US Tariffs World Stocks Plummet Over Threats of Higher US Tariffs

World shares fell on Monday, dented by worries over a worsening trade dispute between the United States and other major economies, while oil prices gave up some of the gains made after major exporters agreed a modest production increase.

The Wall Street Journal said US President Donald Trump planned to bar many Chinese companies from investing in US technology firms and block additional technology exports to China, Yahoo Finance reported.

The report hit Asian stocks overnight and in London the pan-European STOXX 600 index was down over half a percent in morning trade.

Taking a particular hit on the trade tensions was the European autos sector, falling 1.4% and set for its seventh straight day of losses after Trump said on Friday he aimed to hike tariffs on EU car imports by 20%.

MSCI's All-Country World index, which tracks shares in 47 countries, was down 0.3 in morning trade in Europe. Germany's DAX fell 1% to 12,456.28 and London's FTSE 100 gave up 0.9% to 7,613.16. France's CAC 40 shed 0.7% to 5,347.04.

On Friday, the CAC 40 climbed 1.3%, the FTSE 100 gained 1.7% and the DAX added 0.5%. On Wall Street, the future for the Dow Jones industrial average lost 0.6% and that for the Standard & Poor's 500 index was off 0.5%.

S&P500 mini futures fell as much as 0.6% while MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.95% to 6-1/2-month lows. Japan's Nikkei lost 0.8%.

South Korea's Kospi stock index ended higher as investors shrugged off persistent concerns of a trade spat between the world's two biggest economies, while the Korean won slipped by nearly 0.9%. Bond yields edged higher.

The Kospi ended up 0.66 points or 0.03% at 2,357.88. South Korean steelmaker Posco ended 3% higher on positive expectations towards the new leadership after the company selected its final candidate to lead the company on Saturday.

Shares of Samsung Electronics closed 1.27% lower, while SK Hynix ended down 5.3%, marking its biggest percentage loss since March on lean earnings forecast.

The Shanghai Composite Index fell 1.1% to 2,859.34 and Hong Kong's Hang Seng lost 1.3% to 28,961.39. Sydney's S&P-ASX 200 lost 0.2% to 6,210.40 and India's Sensex retreated 0.3% to 35,600.41. Benchmarks in Taiwan and Southeast Asia declined while New Zealand was unchanged.

Investors, Traders Worried

As the threat of a full-blown trade war has grown, the gauge has fallen in five of the last six weeks. Last week it fell 1%—its biggest weekly drop in three months.

"We suspect the Trump team will push ahead with these policies (which will elicit reciprocal tariffs from China and the EU) until US equities start to crumble and polls move against Trump," wrote ING strategists in a research note.

A spread between approval and disapproval ratings of the US president had reached its narrowest since March 2017, they noted.

Chinese shares were among the biggest losers, falling 1.27% and tumbling 3.7% last week, as Trump threatened to hit $200 billion of Chinese imports with 10% tariffs.

Policymakers in China moved fast to temper any potential economic drag from the dispute, as its central bank said on Sunday it would cut the amount of cash some banks must hold as reserves by 50 basis points.

That reduction in reserve requirements, the third this year, had been widely anticipated by investors and is aimed at accelerating the pace of debt-for-equity swaps and spurring lending for smaller firms.

Despite the move, the CSI300 Index of mainland Chinese shares lost 0.8%, edging near the one-year low it touched on Friday.

The index of global auto manufacturers fell 0.7%. It lost 4.7% last week. Trump threatened to impose a 20% tariff on Friday on all imports of EU-assembled cars, a month after his administration launched an investigation into whether auto imports posed a national security threat.

A senior European Commission official said on Saturday that the European Union would respond to any US move to raise tariffs on cars made in the bloc.

Investors and traders are worried that threats of higher US tariffs and retaliatory measures could derail a rare period of synchronized global growth.

Benchmark US crude gained 20 cents to $68.78 per barrel in electronic trading on the New York Mercantile Exchange. The contract jumped $3.04 on Friday to $$68.58. Brent crude, used to price international oils, dropped 55 cents to $74.78 per barrel in London. It gained $2.52 the previous session to close at $75.32.

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