(Reuters) – The Dow Jones Industrial Average tumbled more than 700 points in a global selloff on Monday, triggered by China’s willingness to let the yuan slide in response to the latest U.S. threats on trade.
The yuan sank to its lowest level in more than a decade, and President Donald Trump slammed it as “a major violation”, sending investors scurrying for the safety of assets such as government bonds, gold and the Japanese yen.
Adding to the tensions, China’s Commerce Ministry said that Chinese companies have stopped buying U.S. agricultural products, and that China will not rule out imposing import tariffs on U.S. farm products that were bought after Aug. 3.
Trump stunned financial markets last week by threatening to impose 10% tariffs on the remaining $300 billion of Chinese imports, abruptly abandoning a brief ceasefire.
“The President is playing a very risky game here,” said Robert Pavlik, chief investment strategist, senior portfolio manager at Slatestone Wealth Llc in New York.
“The Chinese yuan weakening the way it has and with interest rates tanking, I think the possibility of a recession has been pushed up.”
The benchmark S&P 500 .SPX is set to fall for the sixth straight session, its longest streak of losses since October 2018. The selloff was broad, with all the 11 major S&P sectors in the red.
Last week, the U.S. Federal Reserve cut interest rates for the first time in a decade as expected but poured cold water on investor hopes of a long easing cycle to cushion the economy from the bruising trade war.
The S&P technology sector .SPLRCT, heavily exposed by its chipmakers and other global technology players to Chinese markets, dropped 3.5%.
Apple Inc (AAPL.O) slid 4.7% as analysts warned that the newly proposed tariffs may hurt demand for its flagship