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Stocks Slump as Trump’s Threat of New Tariffs Scares Investors Stocks Slump as Trump Threatens New Tariffs on China
(about 2 hours later)
A surprise hitch in trade talks between the United States and China spooked investors on Monday, sending global stocks tumbling and raising the prospect of a rough day for Wall Street. A surprise hitch in trade talks between the United States and China spooked investors on Monday, sending global stocks tumbling.
Shares in China led the decline, falling more than 6 percent at one point, after President Trump threatened to raise tariffs against Chinese-made goods to pressure Beijing into reaching a deal. Markets across Asia ended broadly lower as well, while markets in France and Germany were about 1.8 percent lower in early afternoon trading. The S&P 500 dropped more than 1 percent soon after the open, with trade-related sectors such as industrials, semiconductors and technology shares leading the market lower.
On Wall Street, futures contracts that try to predict the performance of shares suggested that major stock indexes on Wall Street would open lower. The decline on Monday interrupted what had been a placid rise for the benchmark index for much of the year. Through late April, the market had enjoyed its best start since 1987, as volatility declined and stocks reached record highs.
Stock markets have picked up in recent months in part on prospects that China and the United States would reach a truce in their trade war. The Chinese economy, the most important growth engine in Asia and one of the world’s largest, has also picked up in recent weeks after a surge of government-driven lending. The climb helped the market recover all of the ground lost during last year’s ugly fourth quarter, when the S&P dropped 14 percent and flirted with falling into a bear market in December.
Mr. Trump’s comments on Sunday threatened to end that growth, rattling investors across the board. The value of China’s currency weakened, and prices for oil and agricultural products fell. The Federal Reserve’s about-face on further interest rate increases helped set off the rally, but signs of progress — and an absence of public rancor — in the trade negotiations between China and the United States also contributed to the recovery in stocks.
In China, the Shanghai Composite Index fell 5.6 percent. Confidence in that progress was dented on Sunday, when President Trump threatened to impose new tariffs on Chinese-made goods unless he saw more progress toward a deal.
In Hong Kong, the Hang Seng Index fell 2.9. Taiwan’s Taiex was down 1.8 percent, while the S.&P./ASX 200 index in Australia was down less than 1 percent. “It’s 100 percent about trade,” said Michael Gibbs, director of portfolio and technical strategy at the brokerage firm Raymond James in Memphis. “We do the know market had priced in the fact that the deal was just about to be done and signed.”
Markets in Japan, South Korea and Britain were closed for holidays on Monday. [Read more about the president’s latest threat and China’s reaction.]
In European markets, Germany’s Dax index and France’s CAC-40 were both about 1.8 percent lower. The Chinese economy, the world’s second-largest and the most important growth engine in Asia, had also picked up momentum in recent weeks after a surge of government-driven lending. Mr. Trump’s comments on Sunday threatened to upend that growth, rattling investors across the board.
Shares in China led the market decline on Monday, falling more than 6 percent at one point. The value of China’s currency weakened, and prices for oil and agricultural products fell. Markets across Asia ended broadly lower as well, and markets in France and Germany were about 1.8 percent lower in early afternoon trading.