June 15, 2018 / 9:20 PM / 8 months ago

GLOBAL MARKETS-U.S.-China trade fight leads stocks lower, oil sinks on supply fears

    * GRAPHIC-World FX rates in 2018: tmsnrt.rs/2egbfVh
    * Trump OKs $50B in tariffs as China vows retaliation
    * China trade spat sparks sell-off in U.S. soybean futures
    * European, emerging market stocks down more than 1 percent
    * Oil slumps 3 percent

 (Updates with close of U.S. markets)
    By Laila Kearney
    NEW YORK, June 15 (Reuters) - Wall Street ended lower on
Friday and global stocks continued to slide after U.S. President
Donald Trump announced new tariffs on Chinese goods, while oil
plummeted 3 percent on expectations that Saudi Arabia and Russia
output would soon increase.  
    Trump announced hefty tariffs on $50 billion of Chinese
imports starting on July 6, with Beijing immediately vowing to
respond in kind, intensifying fears of a growing trade war
between the world's two biggest economies.             
    Trump unveiled a 25 percent tariff on a list of
strategically important imports from China, including cars,
promising further measures if Beijing struck back.
    "Investors are worried that with the trade war escalating,
today it's better to sell out... and take profits," said Michael
O’Rourke, chief market strategist at JonesTrading in Greenwich,
    MSCI's gauge of stocks across the globe                 shed
0.48 percent, while the pan-European FTSEurofirst 300 index
         lost 1.00 percent.
    Emerging market stocks were hit particularly hard, tumbling
1.06 percent, a move maybe attributable as much to a strong
dollar as to trade tensions.
    In commodities, soybeans sank as the U.S.-China trade spat
threatened shipments to the world's biggest buyer of the
oilseed. Soybean futures fell 2.5 percent, hitting their lowest
level since June 23 of last year.              ICE cotton
futures also dropped on the day.             
    Trump's decision on tariffs comes a day after stock markets
rallied on the European Central Bank's decision to hold off on
raising rates at least until the middle of next year.
    By the close of U.S. markets, the Dow Jones Industrial
Average        fell 84.83 points, or 0.34 percent, to 25,090.48,
the S&P 500        lost 3.07 points, or 0.11 percent, to
2,779.42 and the Nasdaq Composite         dropped 14.66 points,
or 0.19 percent, to 7,746.38.
    The outbreak of a global trade war has been the most
frequently cited "biggest tail risk" by investors this year in
Bank of America Merrill Lynch's monthly survey of global fund
managers, on the back of ramped up protectionist rhetoric and
measures by the U.S. administration.
    MSCI's broadest index of Asia-Pacific shares outside Japan
                closed 0.65 percent lower, with Chinese stocks
leading the losses.
    World oil markets cratered on fears of increased supply,
with U.S. Crude on track for its biggest decline since May 15,
and to end the week down 1.3 percent. Brent was headed for a 4
percent loss on the week.             
    The Organization of Petroleum Exporting Countries is slated
to meet next week in Vienna, with two of the biggest producers -
Saudi Arabia and Russia - indicating they were prepared to
increase output. 
    "Everyone is talking about raising production - the only
question is by how much," said Bob Yawger, director, energy at
Mizuho in New York.
    U.S. crude         settled at $65.06 per barrel, down 2.74
percent, and Brent crude          was last at $73.44, down 3.29
    In currencies, the U.S. dollar slipped against the
safe-haven yen in the wake of the announced tariffs, while the
dollar index       , which measures the greenback against six
currencies, rose 0.01 percent. 
    The euro       , which on Thursday suffered its biggest fall
against the dollar in two years after the ECB's interest rate
decision, rose up 0.35 percent to $1.1607.             
    Trade fears drove demand for safe government bonds, causing
U.S. Treasury yields to fall to their lowest levels in a week.
Benchmark 10-year notes             last rose 7/32 in price to
yield 2.9223 percent, from 2.946 percent late on Thursday.
    The 30-year bond             last rose 14/32 in price to
yield 3.0434 percent, from 3.066 percent Thursday.
    “You’ve seen a little bit of a risk-off trade, which is
aiding in the Treasury rally,” said Justin Lederer, an interest
rate strategist at Cantor Fitzgerald in New York.

 (Additional reporting by Nick Brown, David Gaffen, Ritvik
Carvalho, Jessica Resnick-Ault and Karen Brettell in New York;
Editing by Bernadette Baum and Cynthia Osterman)
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