Global stocks sink on festering trade war

LONDON: World stock markets sank Monday on worries over the festering global trade war after US President Donald Trump threatened fresh tariffs on European cars, amid reports he is mulling curbs on Chinese investment in America.

Trump shows no sign of backing down and threatened last week to impose a 20 percent tariff on cars imports from the European Union. That came just after the EU imposed levies on US products, including bourbon, jeans and motorcycles.

"The United States is insisting that all countries that have placed artificial trade Barriers and Tariffs on goods going into their country, remove those Barriers & Tariffs or be met with more than Reciprocity by the USA. Trade must be fair and no longer a one way street," Trump tweeted in defence of his protectionist trade policy which seeks to close trade gaps with other major powers.

Oil prices meanwhile slid Monday after the Organization of Petroleum Exporting Countries (OPEC) cartel agreed Friday with non-OPEC members including Russia to lift crude output by one million barrels per day.

"Markets start the week on a risk-off tone after President Trump threatened to impose tariffs on imported cars from Europe -- and he is now planning to curb Chinese investments in 'sensitive' US industries," said analyst Konstantinos Anthis at traders ADS Securities.

Equities, which are widely regarded as a risky asset in times of economic uncertainty, had already suffered a pummelling last week in response to tit-for-tat warnings by Beijing and Washington.

That has fuelled concerns about the potential damage to the world economy from a full-blown global trade war.

"Downside risks to the economic outlook are rising, with escalating trade tensions currently at the forefront of investors' minds," wrote Citi analysts in a research note.

"The next few months will show if these tensions are likely to deteriorate towards full-scale trade war.

"Whether or not they do, the uncertainty is probably already damaging confidence and investment."

Those concerns were stoked Monday by reports that the Treasury Department is looking at an emergency law beefing up scrutiny of investment by Chinese firms in sensitive US industries.

Treasury Secretary Steven Mnuchin is expected to push the plan this week, Bloomberg News reported.

- OPEC output -

The uncertainty meanwhile overshadowed a modest increase in oil output agreed by OPEC and Russia, and separate news of Chinese easing measures.

The OPEC news had catapulted the market higher Friday because of a lack of clarity over the production increase -- and concerns over spare capacity.

But prices handed back some of those gains on Monday.

"Saudi Arabian Energy Minister (Khalid) al-Falih talked of output by OPEC and the participating non-OPEC countries rising by a total of one million barrels per day in the second half of the year," said Commerzbank analysts.

"In our view, this should be sufficient to rebalance the oil market, so we expect the price to decrease to $70 per barrel in the third quarter."

- Key figures around 1115 GMT -

London - FTSE 100: DOWN 1.3 percent at 7,584.99 points

Frankfurt - DAX 30: DOWN 1.5 percent at 12,387.40

Paris - CAC 40: DOWN 0.9 percent at 5,336.86

EURO STOXX 50: DOWN 1.2 percent at 3,401.39

Tokyo - Nikkei 225: DOWN 0.8 percent at 22,338.15 (close)

Hong Kong - Hang Seng: DOWN 1.3 percent at 28,961.39 (close)

Shanghai - Composite: DOWN 1.1 percent at 2,859.34 (close)

New York - Dow Jones: UP 0.5 percent at 24,580.89 (close)

Euro/dollar: UP at $1.1655 from $1.1651 at 2100 GMT

Pound/dollar: DOWN at $1.3256 from $1.3261

Dollar/yen: DOWN at 109.54 yen from 109.97 yen

Oil - Brent Crude: DOWN $1.39 at $74.16 per barrel

Oil - West Texas Intermediate: DOWN 11 cents at $68.47