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GLOBAL MARKETS-Global stocks pummelled by Trump's tariffs, safe-havens surge

Published 02/08/2019, 09:52 am
Updated 02/08/2019, 10:00 am
© Reuters.  GLOBAL MARKETS-Global stocks pummelled by Trump's tariffs, safe-havens surge
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* U.S. stock futures down 0.25%, European futures down 0.9%

* Trump imposes 10% tariffs on rest of U.S. imports from China

* Interest rate futures price in Fed rate cut in Sept

* Yen marks biggest gain in 2 years, gold near 6-year high

By Hideyuki Sano

TOKYO, Aug 2 (Reuters) - Global stocks are set to take another beating on Friday after U.S. President Donald Trump said he would slap a 10% tariff on the remaining $300 billion of Chinese imports from next month.

U.S. stock futures ESc1 lost 0.25% in early Asian trade after the S&P 500 .SPX lost 0.90% to hit one-month lows.

Pan-European Euro Stoxx 50 futures STXEc1 fell 0.87% while Japan's Nikkei .N225 is on course to fall 2.2% based on futures traded in Chicago NIYcm1 .

Trump's move breaks a truce in the trade war struck in June and could further disrupt global supply chains. U.S.-China summit meeting, people had expected there would be a lull for quite some time," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

"And the market was also relieved by signs of recovery in the semi-conductor sector. But now investors and companies will have to revise their such scenarios."

China's state media quickly denounced the move, with the editor in chief of the Global Times saying on Friday that a trade deal between the United States and China was now "further away." proposed levies triggered a stampede for safe-haven assets, such as U.S. bonds, the yen and the gold while the yuan and the Australian dollar hit multi-month lows.

Gold XAU= held firm at $1,442.9 per ounce, having risen 2.4% on Thursday and near a six-year high of $1,453 touched two weeks ago.

The yen traded at 107.42 to the dollar JPY=EBS after rising 1.3% overnight, its biggest daily gain in more than two years.

The euro also recovered to $1.1082 EUR=EBS , from a two-year low of $1.1027 hit in U.S. trade.

The risk sensitive Australian dollar dropped to a seven-month low of $0.67965 AUD=D4 while the offshore yuan hit a nine-month low of 6.9673 to the dollar.

The 10-year U.S. bond yield fell almost 12 basis points on Thursday to 1.902 percent US10YT=RR , hitting the lowest level since Nov. 8, 2016, when Trump won a surprise victory in the presidential election.

Trump's decision has thrown the Federal Reserve another curve ball that may force the central bank to again cut interest rates to protect the U.S. economy from trade-policy risks. October Fed funds rate futures FFV9 have jumped to now fully price in a rate cut in September, compared with only around 60% before the tariff announcement. Another 25 basis point move is priced in by December.

The new tariffs would hit a wide swathe of consumer goods from cell phones and laptop computers to toys and footwear, at a time when the manufacturing sector is already reeling from the accumulative impact of the trade war.

The U.S. Institute for Supply Management said on Thursday its index of national factory activity fell to 51.2 last month, the lowest reading since August 2016.

Brent crude LCOc1 fell 7.0% to settle at $60.50 a barrel on Thursday, its biggest daily percentage drop since February 2016.

U.S. West Texas Intermediate (WTI) CLc1 crude shed 7.9% to $53.95 a barrel on Thursday and last stood at $54.4, up 0.8% from late U.S. levels. (Editing by Sam Holmes)

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