London: European and Asian markets fell on Monday and the US stocks were nearly flat in early trading as investors worried that a new trade dispute between the US and China could hurt a fledgling global economic recovery.
Germany’s DAX fell 0.9% to 5,571.51 and Britain’s FTSE 100 lost 0.7% to 4,975.01. France’s CAC-40 shed 1.0% to 3,696.18. Asian indexes lost as much as 2%. In mid-morning trade, the Dow Jones Industrial Average fell 52.37, or 0.6%, to 9,553.04. The Standard & Poor’s 500 index fell 5.76, or 0.6%, to 1,036.97.
The US decision to impose trade penalties on Chinese tyres infuriated Beijing, which condemned the move as protectionist and said it violated global trade rules. Crucially, the dispute suggests international economic cooperation is weak ahead of the Group of Twenty summit later this month in Pittsburgh. With the US-Chinese trade a key link in the global economy, investors were spooked by the potential repercussions.
Chen Deming, China’s minister of commerce, said the penalties would hurt relations with the US. A ministry statement said President Barack Obama had given in to “US domestic trade protectionism”.
“The possibility of a trade war would be detrimental to a world economy reeling from the biggest financial crisis in over 70 years, especially at a time when Group of Seven nations are considering the unwinding of fiscal and monetary stimuli,” said Ashraf Laidi, chief market strategist at CMC Markets in London.
Also hurting sentiment outside the US was the dollar’s recent drop against world currencies such as the yen, the pound and the euro against which it hit a yearly low last week. Although it recovered somewhat on Monday, its sharp fall this month has hurt confidence in companies in export-heavy European and Asian economies.
In Asia, Japan’s Nikkei 225 index took the day’s biggest hit, 2.3% to 10,202.06. Toyota, the world’s largest car company, lost 2.6%, electronics giant Canon was off 3.4% and Sony dropped 2.4%.
Hong Kong’s Hang Seng closed down 1.1% while Korea’s Kospi shed 1%. Australia’s key index lost 1.4%, India’s Sensex was down 0.5% and Taiwan’s benchmark fell 1.1%. Shanghai’s market defied the downswing, adding 1.2%. Oil prices dropped in Europe, with benchmark crude for October delivery down 45 cents to $68.84 (Rs3,352.50) a barrel. On Friday, the contract tumbled $2.65 to settle at $69.29.
The dollar, which has tanked in recent days, rebounded modestly to 90.84 yen (Rs49) compared with 90.42 yen. The euro fell to $1.4559 from $1.4597.
Jeremiah Marquez in Hong Kong contributed to this story.