Threat of USA and China trade war rises

Wine from the United States is displayed next to Chinese wine at a supermarket in Beijing. China announced a $3 billion list of U.S. goods including pork apples and steel pipe on Friday that it said may be hit with higher tariffs in a spiraling trade dis

Wine from the United States is displayed next to Chinese wine at a supermarket in Beijing. China announced a $3 billion list of U.S. goods including pork apples and steel pipe on Friday that it said may be hit with higher tariffs in a spiraling trade dis

Fears of a trade war roiled financial markets and sent the USA dollar wobbling Friday after Beijing retaliated against the Trump administration's tariff hikes by threatening import duties on us goods.

Trump announced plans to impose tariffs on about $50 billion of Chinese imports as part of an effort to halt theft of intellectual property. The US Trade Representative Robert Lighthizer also dragged China to the World Trade Organisation (WTO) on Friday alleging Chinese denial of basic patent rights to foreign firms and imposing mandatory adverse contract terms. The contract shed 87 cents, or 1.3 per cent, to close at $64.30 a barrel in NY.

But in contrast to stock market ructions, the country's currency markets remained quiet, with analysts expecting that any Chinese response to US trade actions is unlikely to include changes in its foreign exchange policy.

Perhaps unsurprisingly, the prospect of a trade war between America's capricious president and the increasingly authoritarian Xi, who recently moved to cement his role as probable president-for-life, has done little to reassure markets.

Palladium rose 0.2% to $981.97 US per ounce. The S&P 500 fell 56 points, or 2.13%, while the Nasdaq fell 148 points, or 2.23%.

"There's a whole lot less predictability in the news flow after this week, and I don't think that gave investors a lot of confidence going into the weekend "long" (stocks)", said Art Hogan, chief market strategist at B. Riley FBR in NY.

The Chinese embassy in Washington said in a statement: "If a trade war were initiated by the US, China would fight to the end to defend its own legitimate interests with all necessary measures". Australia's S&P/ASX 200 skidded 2 per cent to 5,820.70.

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The US Senate has completed congressional approval of a sweeping $1.3tn (£921bn) package to fund the government until September. Republican conservatives are dismayed by the free-spending measure, which means Democratic votes are required to pass it.

Industrial stocks were down 1.4 per cent.

Traders are watching medical marijuana producer stocks after the legalization bill passed a second Senate reading in Canada. Economists had forecast a gain of only 0.8 percent.

The United States also plans to impose new investment restrictions and take action against China at the World Trade Organization.

China on Friday said it was "ready to fight a trade war" and unleashed its own proposal to levy retaliatory taxes on imports of 128 United States products worth $3 billion.The back and forth between the two global economic superpowers saw stock markets take a pounding, especially in the USA and Asia. The yield on the 10-year Treasury note slipped to 2.81 percent from 2.83 percent.

The yield closed Thursday at 2.832 percent after going as low as 2.799 percent.

USA diplomats, business leaders and many experts, though, blame China for consistently failing to address long-standing demands to open its markets further.

Analysts said traders were also spooked also by the fact China is the biggest buyer of United States government bonds, which the U.S. needs to keep its economic wheels greased.

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The greenback fell roughly 0.5 percent to as low as 104.635 yen, its weakest since November 2016. The euro rose to $1.2367 from $1.2307.

The dollar index against a basket of six major currencies slipped 0.2 percent to 89.688. The S&P 500 index sank 6 per cent.

The Loonie is up to 77.34 cents US.

USA gold futures for April delivery rose 0.9% to $1,339.50 US per ounce.

"There are a number of bullish things to hang the hat of the rally on this week; be it the inventory report. or the tariff news, or the heightened tensions between Saudi and Iran", said Matt Smith, director of commodity research at Clipper Data in Louisville, Kentucky.

Adding to the uncertainty was news that Trump's national security advisor HR McMaster - seen as a moderating hand in the administration - had stepped aside and been replaced by nationalist John Bolton. Trade jitters could also hit oil markets, but most analysts said other bullish factors outweighed them for now.

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