SINGAPORE- US stock futures slipped, the dollar jumped and Hong Kong shares toppled from two-month highs on Tuesday after the US imposed tariffs on Chinese imports and China quickly responded in kind.
S&P 500 futures which had bounced in relief that Mexico and Canada had cut deals to delay a tariff hit, swung to a 0.4 percent loss. European futures slipped 0.2 percent and the euro skidded beneath $1.02 on nerves Europe may be next.
Hong Kong’s Hang Seng pared gains of more than 2 percent to trade about 1.8 percent higher for the day.
An additional 10 percent US tariff on Chinese exports took effect yesterday. Minutes after, Beijing announced it was imposing tariffs on imports of US oil, coal, gas, cars and farm equipment to take effect on Feb. 10 – reigniting market concern about a prolonged and messy tit-for-tat trade conflict.
Bitcoin came under selling pressure and fell 3 percent to $98,750.
“I think you see what we should get very used to, which is this kind of rollercoaster of public negotiation around tariffs and other policy,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.
Australian shares fell at the closing auction to finish just beneath flat. Japanese stocks pared gains.
Trump’s press secretary said he will speak with Chinese President Xi Jinping in the next couple of days.
Chinese markets remain shut for the Lunar New Year break, though the offshore yuan slid to 7.3236 per dollar after the tariffs took effect.
The more liquid Australian dollar often seen as a proxy for the yuan, fell 0.7 percent to $0.6180.
Gold struck record highs on Monday as worries of a worldwide trade war pushed investors to safety. It traded close to those levels at $2,817 an ounce on Tuesday while Treasury yields crept a touch higher, with markets divided on whether there will be two or just one US rate cut this year.
“The increase in policy uncertainty will be hard to put back in the bottle,” noted J.P. Morgan’s chief US economist, Michael Feroli.
“For the Fed, the weekend’s developments will likely reinforce their inclination to sit on the sidelines and to remain below the radar as much as possible.”