Mainland stocks, yuan drop on concerns over escalating China-US trade friction

Source:Global Times Published: 2018/7/11 12:28:39

The Chinese yuan, stock indexes as well as US futures all slid in early Asia-Pacific trading on Wednesday after US President Donald Trump fired another shot in the ongoing trade friction with China, intensifying the market's risk avoidance emotions.

On Tuesday night, the Trump administration released a list of $200 billion worth of imported Chinese goods to be slapped with 10 percent tariffs, escalating the current trade tensions between the two countries.

The proposed tariffs will not take effect immediately but will undergo a two-month review process by August 30, according to media reports.

However, the foreign exchange market and stock market immediately responded to the signs of escalation.

The offshore yuan weakened to 6.69 against the US dollar during Wednesday's morning session, about 400 pips weaker than the previous trading day.

Meanwhile, the People's Bank of China, the country's central bank, set the yuan's midpoint rate at 6.6234 per dollar, slightly firmer than the previous fix of 6.6259.

The onshore yuan opened at 6.6694 against the greenback, over 300 pips weaker than the previous night's closing.

The Shanghai Composite Index slid 1.66 percent during the morning's opening while the blue-chip CSI300 index went down 2.07 percent.

US stock futures were also trading in the red, dropping between 0.2 percent and 0.9 percent, with the largest decline seen on the Dow Jones Industrial Average. Dow Jones mini futures fell 1 percent on Tuesday night after the tariff announcement.

Lian Ping, an economist with the Bank of Communications, told the Global Times that in the market, reactions to such measures are usually the strongest between the announcement of the tariffs and their implementation, the interval of which can lead to low market expectations and bearish performances.

Guan Tao, a former senior official of the State Administration of Foreign Exchange, said it is unnecessary to overstate the impact of the tariff announcement.

"In the short term, the news is likely to bring some negative emotions in the market, but in the long term, China's financial fundamentals will not be affected," Guan was quoted as saying in a Xinhua News Agency report.

Posted in: ECONOMY

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