On Sunday, President Donald Trump tweeted that he would raise tariffs on $200 billion of Chinese goods from 10% to 25% this week, apparently taking Chinese officials by surprise. In response, China may withdraw from the next round of trade talks scheduled to begin Wednesday in Washington. U.S. officials had indicated progress had been made at talks last week in Beijing, and said it was possible a deal could be reached by the end of this week.
But the sudden hard line by Trump spooked investors. U.S. stock market futures sank, with Dow Jones Industrial Average futures YMM9, -1.00% , S&P 500 futures ESM9, -1.04% and Nasdaq Composite futures NQM9, -1.44% all falling around 2% by Sunday and into Monday.
Just ahead of Shanghai’s open, China’s central bank made a move to stimulate the economy by cutting reserve requirement ratios (RRRs) for 1,000 rural commercial banks, which will make it easier for small and micro companies to borrow.
The worst losses in Asia were seen in China, with the Shanghai CompositeSHCOMP, -5.58% closing down about 5.6%, which marked its worst one-day loss since a 6.4% slump in February 2016. The smaller-cap Shenzhen Composite399106, -6.76% plunged 7.4%, also the worst one-day percentage fall since February 2016. Hong Kong’s Hang Seng Index HSI, -2.90% fell 2.8%.
Australia’s S&P/ASX 200 XJO, -0.82% closed down 0.8%, Taiwan’s benchmarkY9999, -1.80% fell nearly 1.8% and Singapore’s STI, -3.00% key index dropped 3.2%. Japan’s Nikkei and South Korea’s Kospi were closed for holidays.
The decline in Shanghai, which came after an extended market holiday last week, was led by port and shipping companies like Ningbo Zhoushan Port Co.601018, -9.91% and China Merchants Energy Shipping Co. 601872, -10.08% , which both fell by close to the maximum 10% daily limit.
In Hong Kong, Geely Automotive 0175, -7.13% , food processor WH Group0288, -6.84% and Apple supplier AAC Technologies 2018, -6.13% were among the biggest decliners. CSPC Pharmaceutical 1093, -5.26% and China Life Insurance 2628, -6.05% also sank. Apple manufacturer Foxconn 2354, -3.86% and Taiwan Semiconductor 2330, -2.26% dropped in Taiwan. In Australia, Beach Energy BPT, -3.22%