The ongoing US-China trade war took an unprecedented toll on Wall Street on Monday, pulling major indices down by more than one percent. It was not only the New York trading market but also London, Paris, Hong Kong that felt the jitters of investors’ anxiety, followed by cascading capital outflows.
The tensions between Washington and Beijing got intensified with US President, Donald Trump’s last week’s statement. Trump throw another shocker at the world declaring that US was not ready to have a deal with China. His dilly-dallying the trade deal negatively impacted market sentiment, making investor’s switch from risky assets to relatively safer entities such as gold, government bonds and even cryptocurrency.
Last week the market witnessed one of its most volatile movements in the recent years, going from falling, to being bit stable to further down. It included the massive Wall Street sell-out, which occurred last Monday, when China slashed yuan to a ten-years low in a retaliatory move against US.
Goldman Sachs said that the trade-cum-currency fight “appears to have escalated into a full-blown conflict,” As per its predictions a deal would not materialise between Beijing and Washington before the 2020 presidential election.
Goldman said in a note that with the capital escaping the market due to trade war, US growth would fall by an additional 0.1 to 0.2 percent, leading to ‘total uncertainty and sentiment drag’.
It not only the US which is getting pressed by recessive forces. Chinese economy is going through similar struggles, only greater in intensity with the ongoing Hong Kong protests creating further uncertainty in the market.
“China is still in the epicenter of the turmoil, with the lingering trade tensions and the escalating protests in Hong Kong both weighing on risk assets globally,” Gorilla Trades strategist Ken Berman said in a commentary.
The tariff tiff got heightened lately when Trump administration announced new tariffs on remaining Chinese imports worth $300 billion, to be executed from September 1. It virtually put tariff on all the goods imported from China. China retaliated by depreciating its currency, as the People’s Bank of China made the yuan drop below 7 against the US dollar. It is the lowest it has slipped in over a decade. The last it dropped beyond 7 was during 2008 crisis.