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GLOBAL MARKETS-Trade fears slam stocks, commodities, investors eye safety

Published 20/06/2018, 01:21 am
© Reuters.  GLOBAL MARKETS-Trade fears slam stocks, commodities, investors eye safety
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* (Updates to U.S. open, adds commentary; changes byline, dateline, previous LONDON)

* Agricultural commodities, metals, stocks tumble

* Bond yields tumble as U.S. Treasuries in demand

* Oil futures fall, investors eye safe haven currencies

* Risk sentiment hurt as Trump threatens China with new tariffs

* China shares close almost 4 percent lower

By Sinéad Carew

NEW YORK, June 19 (Reuters) - Global stock markets tumbled and U.S. bond yields fell on Tuesday while the dollar rose as investors flocked to safety in the face of a rapidly escalating U.S.-China trade conflict.

Agricultural commodities were also hammered with soybeans feeling the most pain after U.S. President Donald Trump threatened to impose a 10 percent tariff on another $200 billion of Chinese goods. China's commerce ministry described the threat as "blackmailing" said Beijing would fight back with "qualitative" and "quantitative" measures. bonds and the Japanese yen JPY= rallied as investors sought protection. Oil futures also pulled back with U.S. crude seeing the deepest declines.

Wall Street's three major indexes were lower, though the S&P 500's decline was much more measured than that of overseas markets. In China, the Shanghai Composite Index .SSEC had slumped nearly 5 percent at one point.

"The administration has said the saber rattling on trade is a negotiating tactic and that Trump isn't going to create a trade war. That's the bullish case but as the new developments keep unfolding it looks more and more like a trade war," Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

The Dow Jones Industrial Average .DJI fell 341.83 points, or 1.37 percent, to 24,645.64, the S&P 500 .SPX lost 20.98 points, or 0.76 percent, to 2,752.77 and the Nasdaq Composite .IXIC dropped 76.32 points, or 0.99 percent, to 7,670.71.

The pan-European FTSEurofirst 300 index .FTEU3 lost 0.6 percent and MSCI's gauge of stocks across the globe .MIWD00000PUS shed 1 percent. .EU

Front month soybean contracts SV1 fell 5.5 percent, or 50 cents a bushel, to $8.58 a bushel, and at one point fell to $8.41 a bushel, lowest for that crop since December 2008. U.S. crude oil fell 1.2 percent, or 80 cents a barrel, to $65.04; China has threatened to impose tariffs on U.S. crude exports.

GREAT FALL OF CHINA

Emerging market stocks lost 2 percent while MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 2.3 percent lower.

The Shanghai Composite Index .SSEC ended 3.8 percent lower after slumping nearly 5 percent at one point to its lowest level since mid-2016. Hong Kong's Hang Seng .HSI closed 2.8 percent lower. .SS Japan's Nikkei .N225 lost 1.8 percent.

China's economy is already clouded by a sharp slowdown in fixed asset investment growth because of the government's de-leveraging drive, a problematic property sector, mounting debt and rising credit defaults.

"The rising risk of a disruptive trade conflict makes a bad situation tentatively worse," economists at Nomura wrote.

The dollar, yen and Swiss franc rose on Tuesday as traders piled into perceived less risky currencies due to the U.S.-China trade dispute. dollar index .DXY rose 0.31 percent, with the euro EUR= down 0.47 percent to $1.1567.

The Swiss franc increased 0.6 percent against the euro at 1.1495 franc EURCHF= and was marginally higher versus the greenback CHF= at 0.9948 franc.

The Japanese yen strengthened 0.70 percent versus the greenback at 109.80 per dollar as the yen is often sought as a safe haven in times of market turmoil and political tensions.

The skid by China's yuan CNY=CFXS to a five-month low was its biggest fall in a year and a half.

U.S. 10-year and 30-year yields fell to three-week lows, while those on two-year notes slid to two-week troughs.

U.S. benchmark 10-year yields fell to a three-week low of 2.853 percent US10YT=RR, from Monday's 2.926 percent. They were last at 2.878 percent. 30-year yields dropped to 2.991 percent US30YT=RR, a three-week low as well, compared with 3.055 percent on Monday, and were last at 3.014 percent.

With Russia and Saudi Arabia pushing for higher output, crude oil markets were volatile ahead of Friday's OPEC meeting. O/R crude CLcv1 fell 1 percent to $64.67 per barrel and Brent LCOcv1 was last at $74.70, down 0.8 percent on the day.

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