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Wall Street suffers worst losses of 2019 on US-China trade war escalation

Wall Street suffers worst losses of 2019 on US-China trade war escalation

Traders work on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)

NEW YORK: Wall Street stocks plunged on Monday (Aug 5) after a forceful response by Beijing to the latest US tariff announcement escalated an ongoing trade war, exacerbating global growth worries.

The Dow Jones Industrial Average sank 767.27 points (2.90 per cent) to 25,717.74 in the worst session of the year.

The broad-based S&P 500 slumped 87.31 points (2.98 per cent) to 2,844.74, while the tech-rich Nasdaq Composite Index tumbled 278.03 points (3.47 per cent) to 7,726.04.

Stocks opened sharply lower after China's currency tumbled below 7.0 against the dollar, seen as a retaliatory step after US President Donald Trump announced last week he would impose 10 per cent tariffs on US$300 billion in Chinese imports.

Stocks pushed lower following weak US services sector data and went lower still after Chinese state media reported that Chinese firms have stopped buying US farm produce.

China's purchase decision means more pain for the US agricultural sector, which could hit the farm states that helped elect Trump in 2016.

Analysts offered a range of views on whether Monday's moves by Beijing will lead to further tit-for-tat moves.

Chris Krueger, a Washington strategist at Cowen, an investment bank, said of China's rebuttal, "on a scale of 1-10, it's an 11," compared with other possible measures.

The actions "seem designed for maximum political impact," he said. "We expect a quick (and possibly intemperate) response from the White House and consequently expect a more rapid escalation of trade tensions."

But other analysts noted has sometimes not gone ahead with such measures, alluding to reports that the latest tariff announcement was opposed by some key White House aides.

"Negotiations will continue to take place," said Alan Skrainka of Cornerstone Wealth Management. "What we're seeing is hardball negotiations playing out in the public eye."

Losses were broad-based but some companies suffered especially bruising declines.

Apple, which manufactures iPhones and other goods in China, shed 5.2 per cent.

Chip companies, which also import from the country, including Intel and Micron Technology lost 3.5 per cent and 4.9 per cent respectively.

Retailers experienced another painful session in the wake of Trumps' latest tariff, with Macy's, Best Buy and Ralph Lauren all off more than three per cent.

Source: AFP/de


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