London, July 2: Stock markets fell Monday on trade war jitters as Washington prepared to impose hefty tariffs on a range of Chinese imports.

Oil prices retreated after US President Donald Trump tweeted at the weekend that Saudi Arabia's King Salman had agreed to his request to open crude oil taps wider.

On currency markets, the dollar rose on trade war concerns as the euro dropped on worries about the future of German Chancellor Angela Merkel's coalition government.

The German leader, whose nation is the economic powerhouse of Europe, is facing a major crisis over migrant policy that threatens to cost her her job.

Uncertainty surrounding Britain's imminent withdrawal from the European Union also dragged equities markets down, according to Charles Schwab analysts.

“Investors continue to be fearful about the global trade situation,” said David Madden, analyst at CMC Markets UK.

“Uncertainty regarding German politics is playing into the decline,” he added.

The US dollar strengthened meanwhile, with analysts attributing the rise in the greenback's value to the trade war concerns.

“Even if investors' worst fears about trade are not borne out, we doubt that the dollar would fall back sharply in the near term,” Capital Economics analysts said in a note.

– Targeting China, EU and Canada –

Trade war fears have rattled markets across the world, particularly China's which are now in bear territory having fallen 20 percent from their recent highs.

“China's economy will slow down for the rest of the year, but we don't need to worry about any stall yet,” said Zhu Qibing, chief macroeconomy analyst at BOC International China in Beijing.

“The key is how international trade and the dispute between China and the US will evolve.”

US levies on billions of dollars of goods due Friday come after data at the weekend showed Chinese manufacturing activity slowed in June as the world's number two economy shows signs of struggling.

On Monday, Shanghai's stock market dived 2.5 percent, while the yuan extended a retreat that has led some observers to suggest the country's central bank is weakening the unit to offset the impact of a trade war.

While China is a key target in Trump's protectionist America First agenda, he has also set his sights on allies including the European Union and Canada, which on Friday imposed hefty tariffs on $12.6 billion of US goods in retaliation for US measures on aluminium and steel.

Trump, in a weekend television interview, said the EU was “possibly as bad as China” in terms of its trade policies.

Tokyo's stock market meanwhile tumbled 2.2 percent Monday, also as a closely watched gauge of Japanese business showed sentiment was softening.

– Key figures around 1540 GMT –

New York – Dow: DOWN 0.7 percent at 24,101.68 points

London – FTSE 100: DOWN 1.2 percent at 7,547.85 (close)

Frankfurt – DAX 30: DOWN 0.6 percent at 12,238.17 (close)

Paris – CAC 40: DOWN 0.9 percent at 5,276.76 (close)

EURO STOXX 50: DOWN 0.6 percent at 3,375.07

Tokyo – Nikkei 225: DOWN 2.2 percent at 21,811.93 (close)

Shanghai – Composite: DOWN 2.5 percent at 2,775.56 (close)

Hong Kong – Hang Seng: Closed for a holiday

Euro/dollar: DOWN at $1.1602 from $1.1689 at 2100 GMT Friday

Pound/dollar: DOWN at $1.3125 from $1.3213

Dollar/yen: UP at 110.89 yen from 110.61 yen

Oil – Brent Crude: DOWN $1.30 at $77.93 per barrel

Oil – West Texas Intermediate: DOWN 45 cents at $73.70

(AFP/APP)