China Market falls for third straight day trade war worries

The Mainland China equity market closed in the red for third straight day on Friday, 02 August 2019, as risk sentiments dampened amid an escalation in the trade dispute between the U.S. and China after President Donald Trump announced a plan to impose a 10% tariff on the remaining $300 billion worth of Chinese imports. At closing bell, the benchmark Shanghai Composite Index declined 1.4%, or 40.93 points, to 2,867.84. The Shenzhen Composite Index, which tracks stocks on China's second exchange, fell 1.5%, or 23.20 points, to 1,539.86. The blue-chip CSI300 index dropped 1.47%, or 56.03 points, to 3,747.44.

Global equity markets fell on an escalation in the US-China trade war after US President Donald Trump proposed a 10% tariff on an additional US$300 billion of Chinese imports to start on September 1 this year, surprised investors after the White House said Beijing promised to buy more farm goods. That came as their latest round of trade talks ended in Shanghai. China's government added to investor unease by threatening unspecified retaliation if Trump's tariff hike goes ahead.

The U.S. leader said Xi was moving too slowly in the negotiations, after being briefed by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on their meeting with Chinese officials this week, which were the first such in-person talks since the June trade truce.

Commodity prices were rocked by the tariff development with global oil prices falling up to 8%. Iron ore also fell more than 3.5% on concerns that further tariffs could lead to a prolonged period of global economic slowdown.

CURRENCY NEWS: China yuan declined against greenback on Friday, following President Donald Trump's threat of new tariffs on Chinese goods, coming close to breaking the politically sensitive level of seven to the U.S. currency. The yuan tumbled to 6.9520 to the dollar, its lowest level since December, but recovered slightly by late afternoon. The currency's weakness is helping to fuel Washington's trade complaints. The U.S. Treasury Department declined in May to label China a currency manipulator but said it was closely watching Beijing. Trump's tariff hikes in a fight over China's trade surplus and technology ambitions have put downward pressure on the yuan by fueling fears economic growth might weaken. Chinese leaders have promised to avoid competitive devaluation to boost exports by making them less expensive abroad. But regulators are trying to make the state-controlled exchange rate more responsive to market forces, which are pushing the yuan lower.

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