US-China trade dispute escalation weighs on markets

Global equity market suffered a setback last week as the US raised duties on $200 billion of imports from China after President Trump blamed China for “breaking” the trade deal. Though Chinese Vice-Premier Liu He arrived in Washington Thursday and trade talks continued, the tariffs were raised to 25% from 10% on $200 billion Chines goods Friday as the US contended Chinese attempted to renegotiate agreements reached earlier. The S&P 500 fell 2.1% and the ICE US dollar index extended losses 0.1% last week gain.

All six major developed market stock indexes ended sharply lower last week. Hang Seng was the loss leader: it sank 5.1%. All but the British Pound out of six major currencies maintained previous week’s dynamics against the US dollar, while the range of major currency pairs’ weekly fluctuations narrowed as it shifted lower. The Pound was the leader in terms of percentage change: it lost 1.2% against the US dollar.

Expectations of Chinese “necessary countermeasures” to US hiking of import duties on $200 billion of Chinese goods is weighing on global markets following Beijing’s vow of a response. And while companies continue reporting quarterly earnings this week, the prospect of US-China trade talks is uncertain after Vice Premier Liu He said before leaving Washington that US tariffs on Chinese exports should be lifted as a condition for striking a deal.