London, Sept 17: Stock markets were uneasy and the dollar fell Monday following reports that US President Donald Trump is planning to hit China with another round of tariffs, dealing a blow to hopes for conciliatory talks between the two economic giants.
Traders had late last week welcomed US Treasury Secretary Steven Mnuchin's offer to meet officials from Beijing to avert an all-out trade war.
However, The Washington Post and Wall Street Journal said the president had decided to impose 10-percent levies on $200 billion of Chinese imports and could make an announcement in the coming days.
That would come on top of the $50 billion already announced over the summer and would account for about half of China's exports to the United States.
Beijing has threatened to retaliate against any measures. Reports suggest China would call off any meetings if the new duties take effect.
Fanning the flames of the trade conflict, Trump on Monday hailed his aggressive use of tariffs as a success for American business.
“The ongoing conflict between the US and China continues to be a primary driver of market sentiment, with investors concerned about the prospect of a full blown trade war as neither side shows a willingness to blink,” said Craig Erlam, senior market analyst at Oanda trading group.
Hong Kong's stock market led losses Monday, while the main European indices were lukewarm.
– 'Best of a bad situation' –
While investors are in a selling mood, some positives could be taken from reports that Trump was considering 10 percent tariffs instead of the feared 25 percent, said JP Morgan Asset Management global market strategist Kerry Craig.
“Timing is also important when it comes to enacting any new tariffs. A staggered implementation is being viewed as the best of a bad situation,” Craig added.
Elsewhere on foreign exchange Monday, emerging market currencies continue to struggle as investors fret over a possible spillover from financial crises in Argentina, Turkey, and South Africa.
“Equities in emerging Asia have been hit harder than those in the rest of the world today as last week's small recovery has come to a swift end. We would not be surprised if they continued to underperform,” Capital Economics analysts said in a note.
Meanwhile, the pound held up as uncertainty over Brexit loomed large, with British Prime Minister Theresa May warning that her plan is the only alternative to crashing out of the European Union without an agreement.
May's warning came as the International Monetary Fund warned that Britain's economy would suffer “substantial costs” should it depart the EU in March with no divorce deal.
Over on the oil markets, prices were edging upwards as supply concerns rose over the US' imminent return to sanctions on Iran's oil industry.
“Oil prices remain better bid as the market focuses on the potential impact of US sanctions on Iran despite promises by Washington that the Saudis, Russia and the US could together raise output fast enough to offset falling supplies,” wrote Dean Popplewell, vice president of market analysis at Oanda.
– Key figures around 1540 GMT –
New York – Dow Jones: FLAT at 26,143.92 points
London – FTSE 100: FLAT at 7,302.10 (close)
Frankfurt – DAX 30: DOWN 0.2 percent at 12,096.41 (close)
Paris – CAC 40: DOWN 0.1 percent at 5,348.87 (close)
EURO STOXX 50: FLAT at 3,008.73
Hong Kong – Hang Seng: DOWN 1.3 percent at 26,932.85 (close)
Shanghai – Composite: DOWN 1.1 percent at 2,651.79 (close)
Tokyo – Nikkei 225: Closed for a public holiday
Euro/dollar: UP at $1.1689 from $1.1627 at 2030 GMT on Friday
Pound/dollar: UP at $1.314 from $1.3069
Dollar/yen: DOWN at 111.98 yen from 112.00 yen
Oil – Brent Crude: UP 31 cents at $78.40 per barrel
Oil – West Texas Intermediate: UP 10 cents at $69.09 per barrel