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ASIA MARKETS: China Stocks Drop 5.5%, Leading Asia Markets Lower As U.S.-China Trade Deal Appears In Jeopardy

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05/07/2019 | 01:00am EDT

By Marketwatch and The Wall Street Journal

Stocks in Hong Kong fall more than 3%

China stocks suffered their worst one-session loss in more than two years, as Asian stock markets plunged Monday on fears trade negotiations between the U.S. and China were on the verge of collapse.

On Sunday, President Donald Trump tweeted that he would raise tariffs on $200 billion of Chinese goods from 10% to 25% this week, apparently taking Chinese officials by surprise. In response, China may withdraw from the next round of trade talks scheduled to begin Wednesday in Washington. U.S. officials had indicated progress had been made at talks last week in Beijing, and said it was possible a deal could be reached by the end of this week.

But the sudden hard line by Trump spooked investors. U.S. stock market futures sank, with Dow Jones Industrial Average futures , S&P 500 futures and Nasdaq Composite futures all falling around 2% by Sunday and into Monday.

Just ahead of Shanghai's open, China's central bank made a move to stimulate the economy by cutting reserve requirement ratios (RRRs) (https://www.reuters.com/article/us-china-economy/china-gives-modest-boost-to-economy-with-rrr-cut-amid-renewed-trade-tensions-idUSKCN1SC02D) for 1,000 rural commercial banks, which will make it easier for small and micro companies to borrow.

The worst losses in Asia were seen in China, with the Shanghai Composite closing down about 5.6%, which marked its worst one-day loss since a 6.4% slump in February 2016. The smaller-cap Shenzhen Composite plunged 7.4%, also the worst one-day percentage fall since February 2016. Hong Kong's Hang Seng Index fell 2.8%.

Australia's S&P/ASX 200 closed down 0.8%, Taiwan's benchmark fell nearly 1.8% and Singapore's key index dropped 3.2%. Japan's Nikkei and South Korea's Kospi were closed for holidays.

The decline in Shanghai, which came after an extended market holiday last week, was led by port and shipping companies like Ningbo Zhoushan Port Co and China Merchants Energy Shipping Co , which both fell by close to the maximum 10% daily limit.

In Hong Kong, Geely Automotive (0175.HK) , food processor WH Group and Apple supplier AAC Technologies were among the biggest decliners. CSPC Pharmaceutical and China Life Insurance also sank. Apple manufacturer Foxconn and Taiwan Semiconductor dropped in Taiwan. In Australia, Beach Energy and Westpac Banking fell.

"Arguably, Trump's threat to lift tariffs 'shortly' if Beijing does not play ball on U.S. trade demands, may be more a negotiations tactics than an imminent trade action," Mizuho Bank said in a commentary. "Nonetheless, Trump's tweet allusions to tariffs being 'partially responsible for ... great (U.S.) economic results' does raise the threat of misguided trade policy" from the U.S, it said.

After posting a second straight losing week Friday, crude oil prices continued to fall Monday. U.S.-based West Texas Intermediate crude for June delivery was down nearly 2% and global benchmark July Brent crude fell by almost as much.

Stocks mentioned in the article
ChangeLast1st jan.
AAC TECHNOLOGIES HOLDINGS INC -2.66% 45.75 End-of-day quote.0.66%
BEACH ENERGY LTD -1.15% 2.57 End-of-day quote.93.31%
CHINA LIFE INSURANCE COMPANY 0.56% 28.97 End-of-day quote.41.29%
CHINA MERCHANTS ENERGY SHIPPING CO., LTD 1.27% 4.77 End-of-day quote.27.64%
CHINA-SHANGHAI COMP 0.24% 3006.45 End-of-day quote.20.36%
CSPC PHARMACEUTICAL GROUP LTD 0.00% 15.46 End-of-day quote.37.30%
DJ INDUSTRIAL -0.59% 26935.07 Delayed Quote.16.37%
FOXCONN TECHNOLOGY CO LTD End-of-day quote.
GEELY AUTOMOBILE HOLDINGS LTD -1.21% 13.06 End-of-day quote.-4.25%
HANG SENG -0.21% 26432.86 Real-time Quote.2.49%
KOSPI COMPOSITE INDEX 0.60% 2091.62 Real-time Quote.1.84%
NASDAQ 100 -0.99% 7823.553294 Delayed Quote.24.63%
NASDAQ COMP. -0.80% 8117.674437 Delayed Quote.23.37%
NIKKEI 225 0.16% 22079.09 Real-time Quote.9.93%
NINGBO ZHOUSHAN PORT CO LTD 0.00% 3.91 End-of-day quote.17.07%
S&P 500 -0.49% 2992.07 Delayed Quote.19.94%
S&P/ASX 200 0.20% 6730.8 Real-time Quote.18.58%
TAIWAN SEMICONDUCTOR MFG. CO. LTD. End-of-day quote.
WESTPAC BANKING CORP 0.30% 29.66 End-of-day quote.18.09%
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