US-China trade war intensifies: Donald Trump administration designates Beijing a currency manipulator

Tokyo: Global stocks extended their already substantial losses and the offshore yuan hit an all-time low on Tuesday after Washington designated Beijing a currency manipulator in a rapid escalation of the US-China trade war. US Treasury Secretary Steven Mnuchin said on Monday the government had determined that China is manipulating its currency, and that Washington would engage the International Monetary Fund to eliminate unfair competition from Beijing. The Trump administration’s dramatic move against China hastened the risk aversion seen in global markets this week. On Monday, China let the yuan slide in response to the latest US tariffs, which are expected to further aggravate trade tensions between the world’s two largest economies. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.75 percent to its lowest since January. Japan’s Nikkei .N225 shed 2.7 percent, Australian stocks fell 2.6 percent and South Korea’s KOSPI slid 1.5 percent. “Following the latest development in the US-China trade war, all the economic views and moves in the currency and equity markets are driven by a ‘risk off’ mentality which in turn is boosting bonds,” said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities. “The fact that US yields are falling sharply even though Federal Reserve Chairman Jerome Powell did not signal further easing explains it all.” [caption id=“attachment_2527432” align=“alignleft” width=“380”] Representative image. Reuters[/caption] S&P 500 futures ESc1 fell 1.3 percent in early Asian trade. Wall Street’s major indexes already posted their biggest percentage drop of the year on Monday on fears of escalation in the US-China trade war. MSCI’s All Country World Index which tracks shares in 47 countries, extended last week’s slide and has slumped 2.5 percent to a two-month low on Monday. China’s offshore yuan stretched the previous day’s big slide and weakened to 7.1288, a fresh record low since international trading on the Chinese trade began in 2010. The yen, a perceived safe-haven in times of market turmoil and political tensions, was up 0.1 percent at 105.850 per dollar after touching a seven-month high of 105.520. Investor demand for other safe-havens such government bonds also remained high as risk aversion gathered momentum. The 10-year US Treasury yield extended sharp falls overnight and declined to 1.672 percent, its lowest since October 2016.