Stock markets tumble as China-US trade tariffs loom


The So Paulo Stock Exchange (Bovespa).

LONDON - Stock markets fell sharply on Monday on trade war tensions as the US prepares to impose hefty tariffs on a range of Chinese imports.

WATCH: Trade War not ending any time soon, rather could spill over to emerging markets

Oil prices meanwhile retreated after US President Donald Trump tweeted at the weekend that Saudi Arabia&39;s King Salman had agreed to his request to open the taps wider.

In foreign exchange, the euro fell versus the dollar on political unease in Germany.

"Investors continue to be fearful about the global trade situation, and the sell-off in Asia overnight has weighed on sentiment in Europe," said David Madden, an analyst at CMC Markets UK.

"Uncertainty regarding German politics is playing into the decline," he added.

Trade war fears have rattled world markets and particularly China&39;s, which is now in bear territory having fallen 20 percent from their recent highs.

"China&39;s economy will slow down for the rest of the year, but we don&39;t need to worry about any stall yet," said Zhu Qibing, chief macroeconomy analyst at BOC International China in Beijing.

"The key is how international trade and the dispute between China and the US will evolve."

US levies on billions of dollars of goods due Friday come after data at the weekend showed Chinese manufacturing activity slowed in June as the world&39;s number two economy shows signs of struggling.

READ: Canada imposes retaliatory duties on US orange juice and metals

On Monday, Shanghai&39;s stock market dived 2.5 percent, while the yuan extended a retreat that has led some observers to suggest the country&39;s central bank is weakening the unit to offset the impact of a trade war.

While China is a key target in Trump&39;s protectionist America First agenda, he has also set his sights on allies including the European Union and Canada, which on Friday imposed hefty tariffs on $12.6 billion of US goods in retaliation for US measures on aluminium and steel.

Tokyo&39;s stock market meanwhile tumbled 2.2 percent Monday, also as a closely watched gauge of Japanese business showed sentiment was softening.

Europe&39;s main indices were down about one percent around the half-way mark.

Earlier, the Bank of Japan&39;s Tankan report -- a quarterly survey of about 10,000 companies -- showed a dip in confidence from the previous three months, though economists pointed out that it is still around its highest level in more than a decade.

On currency markets, the euro dropped on worries about the future of German Chancellor Angela Merkel&39;s coalition government as tensions over migrant policy boiled over.

Oil prices retreated, having last week rallied on figures indicating surging US demand and OPEC&39;s decision to hike output by a more modest amount than initially thought.

Investors are awaiting also the release Friday of US jobs data, which will provide another snapshot of the US economy and could provide the Federal Reserve with more ammunition to hike interest rates.

Key figures around 1015 GMT

London - FTSE 100: DOWN 0.9 percent at 7,567.95 points

Frankfurt - DAX 30: DOWN 0.6 percent at 12,231.96

Paris - CAC 40: DOWN 1.1 percent at 5,266.20

EURO STOXX 50: DOWN 0.9 percent at 3,364.05

Tokyo - Nikkei 225: DOWN 2.2 percent at 21,811.93 (close)

Shanghai - Composite: DOWN 2.5 percent at 2,775.56 (close)

Hong Kong - Hang Seng: Closed for a holiday

New York - Dow: UP 0.2 percent at 24,271.41 (close)

Euro/dollar: DOWN at $1.1638 from $1.1689 at 2100 GMT Friday

Pound/dollar: DOWN at $1.3154 from $1.3213

Dollar/yen: UP at 110.80 yen from 110.61 yen

Oil - Brent Crude: DOWN 67 cents at $78.56 per barrel

Oil - West Texas Intermediate: DOWN 36 cents at $72.10