The US launches a trade war against China

The US launches a trade war against China

The US launches a trade war against China

European auto shares, sensitive to trade tensions as US officials work toward slapping tariffs on vehicle imports, fell 2.1 percent.

Japan's Nikkei 225 bucked the regional trend, losing 0.3 per cent to 22,697.88.

The Bloomberg Dollar Spot Index slumped 0.76 percent, the most since March 21. South Korea's Kospi added 0.3 percent and Hong Kong's Hang Seng gained 0.8 percent.

Crude oil prices appear to have found a short term base but they are still set to finish lower for the third week in succession.

The S&P 500 index dipped 2.66 points, or 0.1 percent, to 2,801.83. Eastern time. The Dow Jones Industrial Average edged up 9 points to 25,074. The Russell 2000 index of smaller-company stocks gained 0.6 per cent to 1,701.31. Trump's approach deserves more time to win concessions on important issues such as China's treatment of US intellectual property, Burgum said.

But the yuan, hurt by concerns over the China-U.S. trade war and a slowing Chinese economy, has shed 7.6 percent of its value against the dollar since the end of the first quarter of this year. This sent ripples through Asian markets. A strong currency tends to make a country´s exports more expensive. Nearly undoubtedly, if this were to occur, another barb may be forthcoming from President Trump, likely increasing Chinese financial volatility. The markets are very risk-off.

Economists say that while Beijing suppressed the yuan's exchange rate a decade ago to help exporters, the central bank has intervened over the past three years to keep it in line with a rising dollar.

In addition, President Trump has told the Commerce Department to investigate whether imported autos and auto parts threaten America's national security - the same justification the president invoked to impose tariffs on steel and aluminum. Critics lined up to urge the administration to reject auto tariffs. "I'd throw a tax on every Mercedes-Benz rolling into this country and on all Japanese products, and we'd have wonderful allies again". The Alliance of Auto Manufacturers rejected the levies on vehicle, truck and auto parts imports, saying the view was shared by over 2,200 comments it had received. All the while, such a deal could put Trump in a position to compete with his hated European rivals to see who is more willing to cut a new trade deal with China that would allow foreign goods to more rapidly enter the Chinese market.

INTEREST RATES: In an interview with CNBC on Thursday, President Trump said that he was "not happy" about Federal Reserve's recent interest rate increases. While both the Chinese and U.S. economies remain strong, a crash in the USA stock market, especially at a time when interest rates have pushed the Dollar higher, could result in a dramatic change of fortune for the United States if the current atmosphere of caution vis-a-vis China is not reversed from the American side. Both political and economic officials believe that the Fed needs to operate free of political pressure from the White House to properly manage interest rate policy.

CURRENCIES: Trump's comments caused the greenback to decline slightly. In some relevant currency pairs, the Japanese Yen returned to vogue as traders sought safe havens, falling from above 1.13 all the way back to 111.40 against the USD at time of writing; and the AUD/USD rebounded 0.7 per cent following two days of being trounced to now trade back over the 0.7400 handle. The euro rose to $1.1713 from $1.1644.

The Chinese yuan weakness achieved through higher USA dollar-Chinese yuan fixings, while consistent with the People's Bank of China's (PBoC) easing bias, remains an unlikely retaliatory tool given the ongoing risk of capital outflow, in our view.

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