Markets tumble as US-China trade war escalates further

Markets fell sharply on Monday.

The S&P 500 plunged 3.0 percent, the STOXX Europe 600 tumbled 2.3 percent and the Nikkei 225 fell 1.7 percent.

Market losses accelerated over the course of the day as China allowed its currency to fall to a more-than-10-year low versus the US dollar.

That provoked the US to label China a currency manipulator.

“Secretary Mnuchin, under the auspices of President Trump, has today determined that China is a Currency Manipulator,” the Treasury Department said in a release.

This despite the fact that “it’s not intervening consistently or persistently to weaken the currency” said Marc Chandler, chief market strategist at Bannockburn, who suggested that “many people in the private sector may not conclude it is a currency manipulator”.

Indeed, Hedge fund manager and Hayman Capital Management founder Kyle Bass suggested that China is actually supporting its currency by selling US dollars and buying its own currency.

“If they were to ever free float their currency, I think it would drop 30% or 40%,” said Bass.

In any case, Chandler said that this is “another step in the currency war” and “makes trade more difficult”.

As a result, John Higgins, chief markets economist at Capital Economics, said that “investors are right to mark down the prices of global equities in the expectation of a further escalation of the trade war”.