TEHRAN, Young Journalists Club (YJC) -European share markets followed Asian counterparts lower on Monday as investors took fright at news Washington was set to announce a new round of tariffs on Chinese goods in the latest escalation of their trade conflict.
U.S. President Donald Trump’s expected announcement of new tariffs on $200 billion in Chinese goods drew an immediate threat of reprisals from Beijing.
The month-long trade conflict between the world’s two largest economies has rattled investors who fear an escalation will eventually whack global growth, while talks between the two countries have failed to make much headway.
The pan-European STOXX 600 index fell as much as 0.2, while Germany's DAX .GDAXI, home to large exporters and carmakers, dropped half a percent. France's CAC 40 .FCHI and Britain's FTSE 100 .FTSE fell 0.2 percent and 0.1 percent respectively.
Europe’s STOXX 600 had last week enjoyed its best weekly gain since July as the Turkish central bank’s interest rate rise brought a broad relief rally, but the mood was less buoyant on Monday.
However, after the initial falls there were signs that some investors were ready to look past the dispute, with European markets reducing their losses to trade close to flat by 0830 GMT.
Earlier in the day, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 1.2 percent, snapping three straight sessions of gains.
World shares remain more than 5 percent off their record highs touched in January, based on the MSCI world equity index .MIWD00000PUS, which tracks shares in 47 countries.
“On the Chinese side, Mr. Trump has burned a lot of political capital so it’s hard to see how talks can resume if Mr. Trump goes ahead on the $200 billion,” Freya Beamish, chief Asia economist at Pantheon Macroeconomics, told the Reuters Global Markets Forum.
“China’s scope to retaliate is surprisingly limited however, especially since the outbreak of swine flu, which will anyway push up CPI inflation,” Beamish said, referring to the deadly swine fever strain that is seen impacting Chinese pork prices.
Beamish doubted whether the United States would slap 25 percent tariffs on $200 billion of Chinese imports, as the Trump administration has said it is considering, and the Wall Street Journal reported the tariff level would probably be about 10 percent.
But market watchers reckon further escalation is likely.
“China may potentially pull out of trade talks entirely and escalate on the new front of outright export restrictions,” analysts at JPMorgan told clients. “This would of course only inflame the situation further.”