Global stock markets crash as USA trade war with China escalates

Global stock markets crash as USA trade war with China escalates

Global stock markets crash as USA trade war with China escalates

China lowered the trading range for its currency for a fourth day on Thursday, showing its potential for use as a trade weapon against Washington, but the exchange rate steadied following declines that alarmed financial markets. That's when the government allowed market forces to take over and the Chinese yuan fell below 7 to the US dollar for the first time in over a decade.

Just what the fragile global economy didn't need: An unpredictable escalation in President Donald Trump's trade war with China, one that spreads the conflict to currency markets, threatens to involve other countries and raises the risk of a global recession. That came a day after Beijing sent financial markets tumbling by allowing the currency to fall to an 11-year low.

Treasury cited a statement Monday by the People's Bank of China (PBOC) that it had rich experience and policy tools, will continue to innovate and enrich the control toolbox and take "necessary and targeted measures against the positive feedback behavior" that could occur in the foreign exchange market.

Sterling is now wallowing around levels not seen since the start of 2017 and is headed for its lowest point in more than 30 years with the country looking set to leave the European Union without a divorce deal, which most observers say will be economically disastrous. "China has devalued its currency by over 10% with the express objective of neutralizing tariffs, full stop". The central bank can buy or sell currency - or order commercial banks to do so - to keep the yuan's price from swinging too widely.

On Wednesday, the central bank lowered the starting point for trading again, setting it at 6.9996 to the dollar, nearly 0.5% below Tuesday's starting level.

The currency has weakened more than its psychological barrier value of 7.

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The Chinese central bank showed it can "steer global markets" and "quickly weaken" the yuan if needed to offset USA tariff hikes, Stephen Innes of Oanda said in a report.

"The best solution is (for China) to open its capital market", he said. "They have a brawny tool at their disposal".

Trump's decision to impose tariffs on foreign steel, aluminum, dishwashers, solar panels and hundreds of Chinese imports - and the retaliation it's drawn from other countries - has chilled global trade investment. But on Tuesday, James Bullard, president of the Federal Reserve Bank of St. Louis, who voted for last week's rate cut, said the central bank has "done a lot" and argued that it shouldn't respond to every fluctuation in trade tensions.

The cease-fire broke last week when Trump, professing frustration that 12 rounds of negotiations had failed to break the impasse, said he would impose tariffs September 1 on $300 billion of Chinese imports that he previously left untouched.

Moore added that the United States has been frustrated that the Chinese regime hasn't conducted trade talks in good faith, such as before Beijing reneged on provisions agreed over months of negotiations in May.

"But with no clear olive branch being offered by either side the trade dispute has no end in sight, putting downward pressure on equities". The reserves declined by a small margin of $15.5 billion in July to just over $3.1 trillion. "There are signs that this has already encouraged the PBOC to step-up intervention to manage the pace of depreciation".

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